Payday loans come in handy and are much welcome solutions for emergencies. They are only meant to act as short-term loans, and developing overreliance on them can be detrimental to your financial health. If you are wondering how your payday loan will affect your credit, here are insights for you.
How does a Payday Loan affect your credit score?
A payday loan will not negatively affect your credit score when paid on time and in full. If you already have a negative credit score, borrowing and repaying payday loans can help rebuild your credit score. Borrowing, managing a loan, and repaying it on a timely basis shows that you can honour loan terms making you a reliable borrower.
Does a Payday Loan appear on a Credit Report?
A payday loan is treated as any other borrowing; thus, it will appear on your credit report. However, it is common for other lenders to scrutinize your profile more before offering you a loan product if they find out you have borrowed from payday loans. Some even limit how much to give you and review their rates if you have borrowed too much from a payday loan.
How long will payday loan records remain on a credit report?
Whether it’s a payday loan, a credit card, or a mortgage, the records of all your loan applications stay on the credit report for one or two years, depending on the agency. With every application, the lender continuously checks your credit report through various credit reference bureau agencies and checks your score in each. The agencies have almost similar details, and in most agencies, our payday loans Guelph may show up to six years after you borrowed.
The easiest way to rebuild your credit score is to manage payday loans properly. That means you should only pick what you can pay back in full and on time, avoid picking too many payday loans at once and do not make more than one payday loan application at a time.