How Payday Loans Can Affect Your Credit Rating
Your credit score follows you around wherever you go. It is affected every time you borrow, which includes when you use payday loans. Some people avoid payday loans for various reasons, as they fear that it may have adverse effects on their credit score. However, you can relax, because these fast cash loans can actually help boost your credit rating if you take the right steps.
Read on to learn how payday loans affect your credit rating:
- Repaying the loan on time can increase your credit score slightly.
- Payday loans simply appear as loans on your credit report.
- Since payday loans are short term, they can help your credit score quickly.
- Paying the loan on time shows lenders you are a reliable customer.
What Are the Common Mistakes to Avoid When Applying for Payday Loans?
Securing a payday loan can be an instant decision you may consider to meet an emergency expense. However, despite the ease of the application process, avoid committing these common mistakes.
• Requesting too many loans
• Not making repayments on time
• Making multiple applications in a short period
• Not reviewing your credit file
How Do Payday Loans Appear on Your Credit File?
Your credit file has the information related to these three segments - commercial credit information, consumer credit information, public credit information. Each payday loan applied or secured by you will be recorded in the consumer credit section. The following details will be visible:
• Credit inquiry
• Type of credit
• Account terms
• Credit limit
• Payment history
• Defaults/overdue accounts
How Long Do Payday Loans Remain Visible on Your Credit Report?
A late or missed loan repayment will be visible on your credit file for 6 years. They are considered equivalent to any other category of loans by the credit reference agencies. Therefore, you may have to wait for some time before your credit score recovers sufficiently to access lower interest credit alternatives.
Payday loans can improve your credit score if you make your repayments on time and avoid taking successive payday loans. In addition to this, they are among the few short-term financing solutions that help people with bad credit as many lenders skip performing a credit check.
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