The interest rates that come along with bad credit loans will usually be higher than that of traditional bank loans or credit union loans. This is because borrowers with low credit scores are considered less “creditworthy” and may have a difficult time repaying a loan. So lenders compensate for this risk by increasing their interest rates.
Having a low credit score makes life pretty difficult. It’s not as easy to get approved for loans, credit cards, mortgages, and more. And even if you do get approved for a loan you can expect higher interest rates and less favorable terms and conditions. Unfortunately, the only way around this fact is to work on improving your credit score.
So what’s the best way to improve your credit score? Luckily, there are some steps you can take to get your credit back on track. Here are some of the best ways to start boosting your credit today:
These are some simple steps that will help you improve your credit over time. And while it may not seem like an easy task, if you stick to some simple rules you will see your score increase over time. But how is your credit score calculated? This is a great question and an important one for you to answer if you’re working on increasing your score.
The FICO score is calculated using the following formula:
As you can see, this is why making your payments on time is so important. Missed or late payments can get reported to the credit bureaus and then lower your score. The next largest factor is how much debt you have overall. Focus on these two things you’ll see your score increase in the long run.