Do payday loans affect your credit score?

We answer all your questions about payday and short-term instalment loans and your credit record.

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Payday and other short-term loans are typically not the first choice when it comes to borrowing. People generally turn to them if they have a bad credit history or need a quick finance boost and can’t get a loan elsewhere. It’s therefore not unusual to worry about the potential impact on your credit record from taking out this type of loan.

If you’re planning on getting a short-term loan, it’s worth knowing that different lenders will view your credit history differently. Lenders normally make a decision on your application for credit based on their own in-house assessment plus a credit search through a credit reference agency (CRA). There are a handful of separate but widely-used CRAs in the UK, so as an individual, you don’t have one single “credit score”.

Will a payday loan application be visible on my credit file?

In short, yes. A payday loan will always impact your credit record in some way. Your credit file is a record of your borrowing history, so all applications for credit and all repayments will appear there. It’s normal for lenders to run an “application” search, also known as a “hard” search, before offering you a loan. That search will be logged on your credit file for 1-2 years, depending on the CRA.

However, some actions will hurt your file more than others. Some can even help to boost your credit score.

Below, we explain the scenarios in which your credit score can be helped or harmed by payday and short-term instalment loans.

Can payday loans help my credit score and my chance of getting future loans?

This is down to you. In order to build a positive credit score, you need to show evidence of paying back loans on time.

If you don’t miss a repayment on your payday or short-term instalment loan, you’ll clear it in full and on schedule. This will normally be reported back to CRAs. As a result, this can actually boost your credit score – and therefore your chances of getting another loan in the future. What’s more, credit repayments stay on your file permanently.

Can payday loans hurt my chances of getting loans in the future?

The act of applying for credit can have an adverse impact. That’s because any responsible lender should run a “hard” search on your credit history before offering you a loan, and it’s normal for this search to have a slight negative impact on your credit score.

For most of us that’s unavoidable, but provided you then go on to pay off the loan on schedule, that negative impact will be minimal and short-lived. Lenders will be able to see how much you applied for, when and from what source.

Making multiple payday loan applications in a short space of time will almost certainly have a significant negative effect on your credit score, and is a strong indicator of irresponsible borrowing or severe financial difficulties. That means it could seriously harm your chances of being approved for another loan in the future.

Prospective lenders will also want to see how much debt you already have, and how much credit you have access to. If you currently owe money to payday lenders, this is likely to reduce the amount that a lender would be willing to offer you.

Missing a repayment on these loans is an even stronger indicator of irresponsible borrowing. It’ll be reported back to credit reference agencies and have a significant, lasting negative impact on your credit score.

Unfortunately, it is also possible that some lenders could simply be put off by seeing a payday loan in your credit history, even if it was paid back in full and without delay. Regular use of payday loans is more likely to be a red flag.

Compare payday loans

Table: promoted deals, sorted by total payable
How much do you need to borrow?


How long do you need to borrow for?


Name Product Available Amounts Monthly repayment Total payable Link
Lending Stream Instalment Loan
£50 to £1,500
Representative example: Borrow £200 for 6 months at a rate of 292% p.a. (fixed). Representative 1,333% APR and total payable £386.61 in 6 monthly payments of £64.44.
Savvy.co.uk Personal Loan
£300 to £3,000
Representative example: Borrow £1,000 for 12 months at a rate of 152.33% p.a. (fixed). Representative 352.7% APR and total payable £1,999.92 in 12 monthly payments of £166.66.
The Money Platform Short Term Loan
£250 to £1,000
Representative example: Borrow £500 for 6 weeks at a rate of 255.5% p.a. Representative APR 839.20% and total payable: £647 in 1 payment.
QuidMarket Short Term Loan
£300 to £1,500
Representative example: Borrow £300 for 3 months at a rate of 292% p.a. (fixed). Representative APR 1,301% and total payable: £454.37 in 3 instalments of £151.46.
CASH4UNOW Short Term Loan
£150 to £1,000
Representative example: Borrow £200 for 4 months at a rate of 292% p.a. (fixed). Representative APR 1314% and total payable: £332.00, in 4 payments of £83.00.
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Compare up to 4 providers

Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.

Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk.

Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.

Mary, James and the different effects of payday loans on their credit score

Mary and James are a couple considering applying jointly for a car finance deal. They check their credit files to see how likely they are to be approved for a big loan.

Mary took out a payday loan five years ago, but made every repayment on time. This had a positive impact on her overall credit score.

James took out a payday loan two months ago and missed his first repayment. This had a disastrous impact on his credit score.

The couple decided that Mary would be better off applying on her own, with James transferring the cash to her.

Common mistakes to avoid

Taking out a payday loan may be a quick decision you make to cover some emergency expense, but don’t let the ease of the application process lead you into committing any of these common mistakes:

  • Taking out too many loans. Once you repay a payday loan, it may tempt you to take out another one. However, taking out several loans for small amounts can be a sign to prospective lenders that you are not in a stable financial position. It doesn’t matter if you repay the loans on time, the fact that you need to take out so many loans may not be a good sign to lenders.
  • Not making the repayments on time. As mentioned earlier, your repayment history appears on your credit file, which makes it more critical to make your repayments on time. The credit reference agencies will record any payments you miss or are late paying on your file, and any lenders that look at your file can see this for a number of years.
  • Making several applications in a short space of time. As well as taking out too many loans, you should avoid making too many requests within a short period. All applications show on your credit file. Lenders can get a good idea of whether you were approved for loans, based on your applications and how many accounts were opened. Making several requests may indicate that your finances aren’t in good standing.
  • Not checking your credit file. When making loan applications online, it helps to stay familiar with your credit file and also watch for identity theft. It’s essential to check that the records company lists the loan correctly, and to see what your current financial situation looks like to lenders that review your file.

Bottom line

  • Having payday loans in your credit file can be perceived differently by different lenders.
  • Make your repayments on time, and any negative impact to your credit score is likely to be minimal and short-lived. By showing you can borrow responsibly, you’re more likely to improve your score.
  • Miss any repayments, however, and you’ll severely damage your credit score. This will make it harder to secure credit for a number of years.
  • Some lenders might be put off by seeing payday loans in your credit history, even if they were properly paid off.

Frequently asked questions

Read about how different factors can affect your score

We compare payday/short-term loans from

Lending Stream Instalment Loan
Savvy.co.uk Personal Loan
The Money Platform Short Term Loan
QuidMarket Short Term Loan
CASH4UNOW Short Term Loan

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