Information to help you deal with your CRF's

Moderators: TalbotWoods, JaneClack

By no hoper
#451443 Hello

I have some adverse information on my credit report (bankruptcy) from March 2008 which has prevented me accessing mainstream credit deals. However, this has not bothered me as the information is due to fall off my file next March.

However, recently due to emergencies I had to take out two payday loans. I repaid both of them on time & have not taken out anymore since. I have since joined my Trade Union's Credit Union However, I recently read that these type of loans are regarded as “sub-prime” & recorded differently from other credit agreements on your files & even though they where repaid within the terms of the agreements they could still adversely effect applications for any future credit from mainstream lenders.

Can anyone else confirm if this is true?

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By JaneClack
#451923 As they were repaid on time if they were in fact noted on your credit report, there will also be notification that they were repaid. This should not adversely affect your credit rating. Hopefully you will not need to use them again between now and the bankruptcy notice falling off your credit file.

I do congratulate you on joining a credit union - they encourage good savings habits and can lend smaller sums in order to avoid the dreaded payday loan!!
By Vas Deferens
#452043 Payday loans should only ever be used for a one-off emergency and not as a means of long-term borrowing due to theit excessive interest rates. However, their is evidence that people have been rolling over their payday loans month after month resulting in serious debt problems, hence the recent Government clamp-down.

Normally, a person wouldn't resort to using a payday loan unless they couldn't borrow the money from either their own bank or another major lender. Notwithstanding the fact that you were able to pay back the payday loan, the fact that you used one could be interpreted, possibly unfairly, that you might be a bad credit risk.
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By TalbotWoods
#452103 This is from Experian and is their comment on just this

If you repay the payday loan on time and in full then any effect on your credit rating could be positive. When lenders check your credit report they are looking for evidence that you are a responsible borrower. Repaying a payday loan on time and in full should therefore strengthen your case, because many payday and other short-term loan providers are now sharing customer records with Experian. Saying that, some lenders might see the fact that you’ve taken out a payday loan as a sign that your finances are under pressure. Importantly, lenders’ scoring systems are built by modelling actual customer data. As a result, if a particular lender’s experience is that customers who take out payday loans are more likely to miss their repayments, this will be reflected in their credit scoring. Actually, some of the lenders that use Experian for credit checks don’t currently differentiate between payday and other types of loans, so they wouldn’t be able to discriminate anyway. So if you do take out a payday loan, just concentrate on paying it back on time and you shouldn’t hopefully have any problems.

Reading between the line with this, Experian are strongly hinting that one or two paid of promptly and fully ON TIME, should not effect, but continuous use will raise alarms.

Sarah is 100% right here, and this definitely is reflected in the view of the CRAs.

As you know lenders have their own Scoring Systems, and differnt ones will give different weight to PayDay loans, most will very lightly count one or two over a tracked period, but others can just as easily wont touch you at all!

So there is no easy yes or no, but very much a muddy maybe.
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By TalbotWoods
#453533 Also this was in the news today