We can often get quite concerned about our credit score and rightly so. Our credit score will determine what loans we can get as well as sometimes whether we can rent an apartment or even get a job. There are things that we do that can have positive or negative effects on our credit score and it is good to be aware of these so that we can keep it as good as possible.
Why is our credit score important?
Our credit scored is looked at by many people and is used to help them make decisions about you. For example, if you are applying for a loan or mortgage then it will be looked at to see whether it is felt that you are a risky prospect. If you pay everything on time, then this will go in your favour but if you do not then it will be held against you. It could also be looked at by landlords as they will want to make sure that you are likely to keep up with your rent payments. It may even be looked at by future employers and they may judge you based on your ability to manage your money. This means that it can be very important for your future to ensure that you have a good credit score.
How can a payday loan influence it?
Your credit score is made up from information about your finances. This is information about your past and current finances. So, if you have had unpaid debts or not kept up with payments on something like utility charges this will all be on your credit record. Any current loans and contracts will be listed on there as well as details of your salary. If you keep up with all of your payments, then this will go in your favour, even if they are loan repayments. However, if you miss repayments then this will show up and count against you. You will also find that if you get turned down for a loan this will count against you. Other lenders will see that you were turned down and they may decide that they will not lend to you, just based on that one thing. Therefore, you need to be careful what you apply for. A payday lender will not turn you down based on your credit score and so there is less risk when you apply to a payday lender of being turned down and this working against you.
So, if you take out a payday loan and repay it when requested, this could show up as a positive on your credit record. However, if you take out a payday loan and do not manage to repay it on time, then you could end up with a negative item on your credit record. You will need to think hard about whether getting one is the right thing to do.
Should I get a payday loan?
It is wise to only ever take out a loan if you are confident that you will be able to repay it on time. This is true for a payday loan as well as any other types of loan. With a payday loan, you will be repaying all of the money that you owe in one go. This is a risk in some ways, as you will have to find a large amount of money to repay the loan. Obviously, the amount that you have to repay will depend on how much you borrow in the first place. It is therefore sensible to work out how much you will be able to afford to repay before you take out the loan. Look back at bank statements and your checking account to see how much you would normally be able to afford. Think about whether you will be able to budget and manage that way. It might be that you only need a small amount which you will be able to repay. Or it could be that you will be able to cut down your spending in order to afford it. Maybe you can think of some ways that you will be able to earn more that will also help you. It is worth actually doing the math and working out whether there is a method where you will be able to afford it. Consider the likelihood that you will be able to stick to this as it is easy to plan things but much harder to stick to them in reality. It could be wise to plan to cut back a lot more than necessary so that you have spare money just in case something else crops up.
If you are completely confident that you will be able to manage the repayment, then this loan could be suitable for you. However, if you are not very sure, then it could be better to not get the loan as it could have a negative impact on your credit score. It is something that only you will be able to calculate and decide on. It depends on whether you feel that you will be able to manage that repayment.