Can Payday Loans Improve My Credit Rating?
  • Missed or late payments
  • Debt management plan
  • Discharged bankruptcy
  • Defaults, CCJ’s or IVA’s

Can Payday Loans Improve My Credit Rating?

The short answer to this question is no. A payday loan definitely will not help to improve a credit rating. Payday loans offer a short term financial boost, but as a long term action, they offer little benefit to those who use them. Thus payday loans should never be used to manage long-term debts.

Can Payday Loans Improve My Credit Rating?

Payday Loans and the Existing Myths

Some of the rhetoric surrounding payday loans has historically given the impression that a payday loan can have a positive effect on your credit rating. Much of the perception is that repaying a payday loan on time and in full will strengthen your case with lenders. This however, is not the case and the simple presence of a payday loan on your financial history can have a serious detrimental effect on your ability to successfully apply for a mortgage.

The Problem with Payday Loans and Lenders

From a lender’s point of view, payday loans show poor money management and we recommend that you avoid these. The reason for this, is because payday loans were designed in order to give individuals access to money quickly. They also highlight, how an individual at times has not managed their money correctly. Unfortunately this is something that mortgage lenders don’t want to see, as they will view you as a higher risk, and possibly an individual who they cannot guarantee to make the repayments.

For this reason, people considering payday loans should explore other possibilities to improve their cash flow and financial situation. Much of these options are longer term, but will prevent the sort of situation that would require a person to need a payday loan.

  • Watch out for overspending – Review your outgoings and where possible make reductions, perhaps to particular brands in your grocery shopping.
  • Use credit cards less frequently and more wisely – Credit cards present a seemingly easy solution to short term cash flow problems, but relying on credit cards when cash is low will definitely expand your spending threshold, and simply serve to move your debt problems to another time.
  • Find ways to increase your income – It may seem over simple, but increasing your income is the best manner of improving cash flow. Are you able to get a second job (perhaps some part time for the short term), or is there a promotion going? Be careful not to increase your spending with your income.

How Serious are Payday Loans and Bad Credit for Mortgages?

Regardless of your experience, whether you are an experienced landlord expanding an existing property portfolio, or a first time buyer, bad credit can be a major stumbling block in finding the mortgage that you require. Many high street lenders will turn down applicants based on their history of adverse credit, and payday loans will only serve to worsen the problem.

We understand that this is an unfortunate situation for some individuals. However, even if you have had a payday loan in the past, please contact us regarding a bad credit mortgage. In some instances we may still be able to find a suitable mortgage for you as all our lenders will look at your credit history as whole and not isolate it to one part.

If you know you have had payday loans in the past and feel your credit rating may have suffer because of it. Please head to our credit report page to access a copy of your credit report. Alternatively, head to our “How to improve your credit rating” guide to see what you can do to improve your financial situation.

If you already have a credit report, then please contact one of our trained advisers who will be happy to help.