Lenders will only consider income that goes into your bank accounts, so being paid in cash could affect how they perceive your means of repaying a loan.
To deem you creditworthy, lenders like to see examples of how you have previously handled your finances. Getting paid in cash makes it harder for them to see this and so they are less likely to lend to you. However, there are actions you can take to boost your chances of being accepted for a loan, even if you’re paid regularly in cash.
Will cash payments be visible on my credit file?
Your credit report only contains information about your borrowing and bill payment history. It doesn’t contain information about your income, regardless of how it is paid to you.
However, in most cases, lenders will request information about your income when you apply for a loan. This will be through requesting recent bank statements, so it will only consider income that’s been deposited in your account.
That’s why it’s a good idea to deposit all cash payments into your bank account if only for a few moments.
Will being paid cash-in-hand affect my chances of getting a loan?
Lenders check through your income information while assessing your creditworthiness. If the money doesn’t go through the bank at any time, this may put lenders off approving you for a loan, as your evidence of regular income could be perceived as too weak.
If you are paid cash-in-hand, it’s a good idea to make regular payments into your bank account, so that lenders can see evidence of regular income. As well as your bank statements, lenders may want to see payslips and tax slips, so keep these handy.
Ideally, these cash deposits will be as similar as possible to the cash-in-hand payments both in size and regularity, so avoid heading down to the pub before visiting the bank.
Without evidence of regular income entering your bank account, it could prove extremely difficult to be approved for a loan, even though your employment information is included on your credit report.
Does paying for everything in cash affect my chances of getting a loan?
Your credit score improves when you show evidence of paying bills on time. This includes direct debits paid to companies and paying off your credit card balance. If you miss a payment, this will harm your credit score.
If you pay all your bills by cash or cheque, you may feel as if your credit score would be perfect, as there’s no evidence of missed payments.
Sadly, it doesn’t work like that.
If there’s no evidence of you making payments on time, you have no credit history. Your credit score is essentially 0, and you’ll struggle to be approved for loans or credit.
That’s why it’s smart to pay for regular goods or services by direct debit, even if you’re paid cash-in-hand by your employer.
It’s also a good idea to take out a credit card, even if you don’t need to borrow money. By making a few small payments and paying your balance in full each month, you can build your credit score and boost your chances of being approved for a big loan when you need it.
Do
Deposit all cash payments through your bank account.
Make regular cash deposits, so lenders can see evidence of regular income.
Keep detailed records of all your cash payments, including payslips and tax slips.
Pay for regular goods and services by direct debit.
Don’t
Accept cash-in-hand payments from an employer without an accompanying payslip. If your employer tries this, they are breaking the law.
Spend loads of your cash before running it through your bank account.
Jim is a self-employed carpenter, who accepts cash-in-hand payments from his customers. He keeps detailed records of all his payments and pays his tax to HMRC in a timely manner.
Despite being well paid and never out of work, Jim found it more difficult to be approved for a mortgage due to being self-employed and being paid cash-in-hand.
Still, after showing his chosen mortgage lender 6 months' worth of bank statements as well as his annual tax statements, he was able to be approved for a mortgage.
* This is a fictional, but realistic, example.
Bottom line
Being paid cash-in-hand isn’t illegal, provided you’re given a payslip and the correct tax is paid. Sadly, some lenders will still treat you as a risky prospect. However, by making the effort to document your regular cash payments via bank deposits, you should be able to overcome this scepticism.
Frequently asked questions
You have every right to negotiate the terms of your employment contract before you sign it, but your employer cannot be forced to accept your request for payment by bank transfer. Cash payments are completely legal, provided an employer provides you with a payslip and subtracts the correct amount of tax via PAYE. Of course, you can turn down the job if you’re not happy with this. Once an employment contract has been signed, the terms cannot be changed without your agreement. That means an employer can’t change from paying you by bank transfer to paying you in cash without you agreeing to this.
If your employer doesn’t give you a payslip, it is breaking the law. Report the incident to HMRC.
When self-employed, the roles are reversed. Now, it’s you who draws up the terms of work and your customers who have to agree to them. However, unless there’s written proof that this was specified before the work started, you have no legal right to refuse cash payment for a job.
Finder survey: How important do Brits think it is to have a credit score?
Response
Female
Male
Very important
45.03%
42.39%
Quite important
37.8%
39.4%
Not that important
9.64%
11.41%
Not important at all
3.46%
4.08%
I don't know what a credit score is
4.07%
2.72%
Source: Finder survey by Censuswide of 1032 Brits, December 2023
Read about how different factors can affect your score
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more.
Learn the facts about loan applications and your credit score plus what you can do to minimise the impact.
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