Skip to main content
  • A credit score helps lenders decide if you are eligible for a loan
  • There are different types of credit score based on various financial factors
  • You can still get a loan with bad credit

Credit scores are designed to help lenders decide whether to approve you for a loan or not. As well as as affecting the decision you get on your application, your score will also dictate what loan terms you are offered. Your credit score is created using an algorithm which takes into account your borrowing history.


What is a Credit Score?

A credit score is designed to help lenders make decisions on who is an appropriate customer. Banks and lenders want to know how much of a risk a potential customer might be for defaulting on their loans. Good credit indicates that a customer is less likely to default on payments, whereas poor credit suggests that a potential customer will be a higher risk. 

To work out how much of a risk you are, and therefore to decide your credit score, Credit Bureaus look at your borrowing history and see if you have been able to repay debts in the past. This means that banks and lenders can look at your score for a general idea of your trustworthiness, instead of having to look through all of your financial and borrowing history.


Types of Credit Score

When we talking about a credit score, it’s important to know that there are many different types. The most common is the
FICO score, but you should know that you have a credit score associated with all of the major systems. No matter which one you use, most models are looking to predict how likely you are to pay your bills on time.


How is my Score Decided?

The FICO is a score that ranges from 300 to 850 and is based on:

  • 35% Payment history: Have you missed payments or defaulted on loans?
  • 30% Current debt: How much do you owe, and are you maxed out on credit cards?
  • 15% Length of credit: Is credit new to you, or do you have a long history of borrowing and paying it back?
  • 10% Types of credit: Do you have a healthy mix of different types of debt: auto, home, credit cards, and others?
  • 10% New credit: Have you applied for numerous loans in the recent past?

Checking Your Credit?

Free credit reports from the three major credit reporting agencies are available to all U.S. consumers under federal law at A free report is available once a year from each bureau.

These reports don’t include a score, however it is becoming increasingly common for us banks to offer free credit checks to their customers. See also, how does a credit check work.


How Can I Improve My Credit Score?

Improving your credit score is not a quick process, it’s about creating good habits and patterns of behaviour over a long period of time. Here are a few things you can do if you’re looking to improve your

  1. Pay your bills on time
  2. Keep your credit card balances low
  3. Only open new accounts as needed
  4. Pay off excessive credit card debt
  5. Check your credit report regularly
  6. Guard against identity theft


Can I Get a Loan With Bad Credit?

Not every loan requires you to have good credit. Payday loan companies like Finger Finance will offer loans taking all backgrounds into consideration, so bad credit doesn’t need to be a barrier to borrowing and money. Find out whether you’re eligible for a loan with Finger Finance, by applying online and receiving an instant decision on your loan.


Was this article helpful?
Charlotte Diffey

Charlotte is an expert writer with lots of experience in the financial world. Read her articles for useful guides on payday loans and advice on how to boost your savings.