A very common question people who are interested in applying for payday loans ask, is ‘do payday loans affect your credit rating’? The answer is yes. These types of loans do have an impact on your credit score in the UK. Depending on the outcome of the transaction, this type of loan can either impact your credit in a positive or negative way. Loans that are paid on time and paid in full typically have a positive impact on your credit rating. In comparison, loans that are not paid in full have a negative affect on your credit.
In the UK, lenders who offer these type of loans report closure of the loans when either it has been paid in full as promised or when the payday loan has not been paid as agreed and goes into default. Making timely payments on your loan as agreed is the only way to make certain your loan benefits your credit. If you fail to make timely payments and your loan defaults, it will be reported to the credit bureaus.
Once approved for a payday loan in the UK, you must make timely payments on your loan and satisfy the loan in full. The main benefits of paying on time as agreed is that you know that the loan will be reported as paid in full. If your goal is to improve your credit rating, you must make sure you have the funds to cover each and every payment. Otherwise, you are putting your credit at risk.
A common question that applicants often have is whether each timely payment they make is reported to the credit bureau like a traditional loan. Most lenders do not report each timely payment that is made like banks do. Even though lenders do not report each individual payment received, you don’t want to risk violating the terms of your loan by paying late because your loan may default. If your payday loan defaults, the credit bureaus will be notified of the default. If your goal is to improve your credit, then you should make sure you pay it on time and in full as agreed.
If you are thinking about applying for a payday loan and wondering how applying for one will impact your credit, you are not alone. Many applicants wonder how these loans will impact their credit. Although these loans are not traditional loans, they can and do affect your credit rating. If your goal is to improve your credit rating in the UK, plan on making timely payments and paying your loan in full. If you fail to make payments as agreed and your loan defaults, it will harm your credit rating and may hamper your chances of being able to secure a loan in the future.