A payday loan is something that many people want to try to avoid because they have heard all sorts of negative things about them. It is worth making sure that these are not just myths as you could be avoiding a way of borrowing that might actually benefit you. This means that you need to be aware of all of the facts including whether the loan will have an impact on your credit rating and if that will be a good or bad one.
What is a credit rating?
A credit rating is a document that is put together by an agency who will then allow other companies to look at it. The document contains of record your finances and anyone that you want to borrow form or otherwise engage in financial transactions with may want to look at it. For example, if you are renting a property the agent will do a check on behalf of the landlord and if you want to borrow money then the lender will look to see whether they feel they can trust you. The credit rating will include information such as items you pay for regularly such as mobile phone contracts and utility bills and it will also document any missed payment and loans that you have. It will have details CCJ’s as well as your salary and some other information.
This will allow them to make an assessment of you. Some people think that you are given a score and that is used to judge you but that is not really accurate. Each person checking will have a different criterion that they are looking for. This means that some items which are seen as negative by some, perhaps such as a few missed repayments on a loan, others may not mind about as they can profit from someone who misses a few repayments. As each has their own criteria it is tricky to know what to do to look the best. However, it is wise to check your own credit report and just make sure the information is all correct and if not, then get it changed.
How do loans impact it?
Loans will appear on a credit report. Anyone will be able to see what money you owe and whether you are keeping up with the repayments. If you miss payments that will show and if you default massively on a loan that will also show as will any CCJ’s for lack of payment. As different people judge it differently it is hard to know quite how a loan will impact the credit report. However, if you can show that you are able to repay debt, then this can only be a good thing. If you miss a few payments, the reaction may vary between people. If you have huge problems repaying then this will be likely to be a negative sign for everyone.
How would a payday loan impact it?
It is tricky to say exactly how a payday loan would affect it specifically. Obviously the same applies as above and so you will need to show that you are able to repay it or if you miss a repayment you soon get on top of things. As a payday loan is available to anyone including those who have a poor credit rating, some people might see the fact that you have one as a sign that you feel your credit rating is not good enough to borrow any other way. Of course, you might just get the loan because you need money quickly or you felt it right for you. It is sometimes possible to add a note onto your credit report and this could be worthwhile if you think that you might be negatively judged as a result.
If you are really worried about the effects of a payday loan, then it is worth looking at alternatives first. The best way could be just not to borrow at all and then you will have nothing to show up on your credit report. If you have savings or can wait and save up then this could be a better option. There are also other forms of short term borrowing which you might be able to use. However, all loans could have an impact on your credit report. It is really important, whether you are borrowing using a payday loan or any other type of lending, that you ensure that you can repay the loan when needed. Although, an off missed payment might be okay, you do not want to get into big financial trouble as this will always have a negative impact in your credit record. Also make sure that you are choosing the right loan for you and that you compare lenders so that you get the best value for money from your loan.