Will My Credit Score Be Negatively Impacted by a Payday Loan Application?
No matter what type of borrowing you do there is a risk that your credit score will be negatively affected as a result of your application. Payday loans and short-term finance in the form of instalment loans are the same as any other type of credit, and you must be aware of the importance of your credit score and how every financial decision could have an impact on your credit file. A payday loan is the perfect small bridging finance for those people suffering cashflow problems when payday is just around the corner. You might only require some money to get you through the next few days or weeks, or to cover an unexpected cost like a broken appliance at home or a big bill that you didn’t see coming.
A payday loan is easy to apply for, and with responsible lending becoming a more popular approach for payday loan companies in the UK over recent times, there are options open to even those with poor credit scores to acquire financial assistance even if traditional lenders would not accept an application for a loan or credit of any sort.
When you apply for a payday loan it will be visible on your credit score, just as any form of financial application is. It will appear to future potential lenders if you apply for finance and they have to run a credit check on your application. Payday loans were seen as negative marks on a credit file in the past, but as with any type of debt it isn’t the debt itself and the loan that marks a persons credit file negatively, it is how that person deals with the loan and the repayment terms.
It is vital that you understand your financial responsibilities and commitments prior to agreeing to a short-term payday loan. Understand the full lump sum amount that you must repay to the lender, as long as any interest that will be applied and fees. Understand your payment dates (whether a one-off payday loan situation, or an instalment loan over several months) and NEVER miss a payment. A payday loan will have a negative impact on your credit score for sure if you miss payments and start to accrue further debt on top of the initial short-term loan sum.
Responsible payday loan lenders can now offer payday loans to bad credit applicants. There are many choices out there for you in this day and age, even if you are suffering cashflow problems and require financial assistance but you have an adverse credit history. Even if you do have a poor financial history, and you understand that an application for a payday loan will be present and viewable for future lenders to see on your credit file, it is not the end of the world. There is help available for you, and with clever management of your debt and an ability to make regular payments on time, you can build a good credit score in the future and not have to worry about a loan application appearing on your file.