Do Payday Loans Affect Your Credit Rating? |
Posted: June 11, 2019 |
Clear And Fair, a payday loan comparison website, have put together a blog with loads of advice on how payday loans affect your credit rating. You can read a sample of the blog below or read the full blog here: Do Payday Loans Affect Your Credit Rating? Credit Ratings ExplainedCredit scores are used as a measure of reliability. When a lender is going to provide a loan, they want to know that they can rely on you to pay it back. This includes any kind of loan, from payday loans through to mortgages. A credit score will therefore be created based on money you’ve borrowed in the past and when you paid it back. At its simplest, if you have borrowed money and paid if back on time, then you’ll have a good credit score. If you’ve borrowed money and failed to pay it back or were delayed, then your credit score will decrease. However, while that’s the basic idea, credit scores aren’t actually that simple in practise. There are a lot of other factors that influence your credit score to different degrees, such as the amount of credit you use and the length of time your credit history spans. Does applying for a payday loan impact credit score?Applying for a payday loan or short term loan can impact your credit score because it shows up on your credit report. When you apply for a payday or short term loan, the lender will complete what’s called a ‘hard search’ of your credit report. Whenever a hard search is completed of your credit file, it gets recorded. Other lenders in the future can see that you’ve applied for a loan and, if you’ve got a large number in a short space of time, it might suggest that you’re frequently in an unstable financial position and therefore not likely to be a reliable borrower. If you apply for several loans, every instance will be recorded separately. This means you should try to only ever apply for the loan which you think is most likely to be accepted, rather than trying several applications. This will have the smallest impact upon your credit score.
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