Can Payday Loans Improve Your Credit Score?

Do you have a poor credit score? If you do, you will no doubt be aware of the impact that it can have on your life. Amongst the issues a poor credit score can cause are:

• Inability to get credit – You’ll no doubt be aware at how tough it is to get credit when you have a poor credit score. Whilst in the past there may have been a little hope, current economic conditions have led to banks and credit card companies employing a very stringent lending criteria.
• Denial of employment opportunities – A very poor credit history can actually lead to you losing out on job opportunities. In certain positions of trust such as upper level jobs in the financial industry may not be available to you if you have a very poor credit record, especially if you’ve been bankrupt, have multiple CCJs (County Court Judgements) or have been subject to an IVA (Individual Voluntary Agreement).
• Can’t get a mobile phone contract – If you love to have the latest phone then unfortunately you’ll almost certainly have to pay for it upfront because mobile phone contracts require credit checks and are much more stringent than ever before.
• Difficulty in getting a rental property – Privately renting a good quality flat or house will almost certainly involve a credit check. That means if you have a good chance of being turned down for your application unless you can find a guarantor.
• Hard to start your own business – Business finance can be hard to get at the best of times but if you have bad credit it can be almost impossible to get. Even government loan schemes often require a credit check which will be hard to pass if you have poor credit.

If you are looking to improve your credit score, then it’s important to realise that there are ways to do this but it’s not going to be easy and it’s not going to be quick. Amongst the things you can do are:

• Ensure you are listed correctly on the electoral register
• Ensure all your current credit is being repaid regularly and on-time and that you do not miss a payment
• Check your credit file with various agencies such as Experian and Equifax to ensure that the information they hold on you is not accurate and request for it to be changed if it is.
• Stop applying for multiple loans, credit cards or other sources of credit. Too many applications will negatively impact your credit score.

Using Payday Loans To Improve Your Credit Score

One of the most effective ways to improve your credit rating however is surprisingly take out more credit. This may come as a surprise but if you think about it, it isn’t. A poor credit score shows that someone has mishandled their finances in the past and by taking out more credit but handling it in a positive and correct manner, you can help improve your credit score. With a poor credit score it may almost be impossible to take out a bank loan or a credit card which make payday loans perfect for this purpose. This is for three main reasons:

• All credit goes on your credit file: When you apply for a payday loan, it goes onto your credit file. When you repay it, it also goes on your credit file which is obviously a positive signal.
• It doesn’t show as a payday loan: Currently, payday loans are distinguished as such on your credit file so if you are worried that having a payday loan on your credit file will be a negative in some way then there is no need to be concerned.
• Taking out a loan and repaying it on time shows that you can handle credit and over time thi will boost your credit score. Credit scoring works on behavioural prediction which means they look to how you have acted in the past to predict your likely future behaviour. If generally you are taking out credit and paying it off on time, this shows that you are more trustworthy and reliable and should increase your credit score and help getting normal credit more likely in the future.

Payday loans aren’t just for emergencies and can be a powerful tactic in ensuring your credit score is repaired.