How Payday Loans Can Impact Your Credit Score

How Payday Loans Can Impact Your Credit Score

How Payday Loans Can Impact Your Credit Score

Do you know what your credit score is? When was the last time you checked your credit score? It changes frequently and you never know when you will need it, but there are plenty of times a credit report may be required including as to be used as a reference or as formal documentation. Your credit score can show you things such as how much outstanding debt you may have, how your score is impacted by how many loans you acquire, the kinds of debt you have and multiple other things.

Having a good credit score can help give you some financial comfort when it comes to applying for things like a mortgage or lines of credit. A poor credit score can prevent you from being approved for many things from credit cards to even a new cellphone. But there are ways to help bring your score up over time, but will take some financial discipline.  Having debt isn’t always a bad thing; in some cases having no debt can have a negative effect on your credit score and carrying a variety of types of debt such as student loans, credit card, and a mortgage can increase your overall score.

You also should know your credit score when applying for payday loans. This is because when it comes to payday loans, it is the same process as any other loan, we check to see your current credit score before making a decision on your loan application and depending on your score, it will help us make our decision the kind of loan we will grant you. Depending on the kind of loan you apply for, each lender including GoDay has a debt to income ratio we apply to decide whether or not you will be able to service the loan.

As we mentioned, when it comes to your credit score there are numerous things that impact your score. A payday loan or any loan application for that matter is one of them. That’s right; any loan application can affect your credit score, even if it is just by a few points.  Why? This is because 10% of your credit score is calculated through the number of credit-based applications you make.  Meaning that every time you apply for a form of credit, it shows up on your credit report and numerous applications can show that you are possibly taking on more debt than you can handle or that you are looking for fast cash.

There are also many other ways a payday loan can affect your credit score including the length of time you’ve had your loan, your loan payment history, the interest rate on the loan, how many loans you have outstanding, and many more factors depending on your financial situation. These are all things to consider when applying for a payday loan since it will show up on your credit score.

No matter what kind of loan you’re looking at, make sure you know where your credit score stands and how a loan may affect it.

For more information on you credit score and what affects your score, visit Debt Canada here.

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