Will getting a payday loan impact my credit score?
Payday loans are quick credits that can help you meet unforeseen expenses. Though it comes relatively expensive – the interest rate is typically high, the process is fast, as it takes less than an hour for some lenders to consider your application and disburse funds. In fact, some lenders have fully automated the process – application, appraisal, approval, or otherwise and disbursement is all digitized.
More often, payday loans are offered by non-bank financial institutions, mainly FinTech, most of whom do not use credit scores as an eligibility criterion. Unlike many other types of personal loans, where credit score is the first consideration for your loan eligibility, most providers of Payday loans do not consider your credit score. As such, these lenders also do not render your loan report to the credit bureaus, so when you take a payday loan, it does not affect your credit score, because the credit bureaus are not aware of the loan.
However, it is important to note that some conventional banks now offer payday loans, so if you take a payday loan from a commercial bank, the report goes to the credit bureaus and that directly impacts your credit score. Likewise, some FinTech, especially those with microfinance licenses from the Central Bank of Nigeria, are increasingly leveraging credit bureaus and indeed using credit score as an eligibility criterion, especially to determine the maximum amount a potential borrower can access.
Your actions can determine whether Payday loans affect your credit score or not
When you do not want a Payday loan to affect your credit score, search for non-conventional lenders on nairaCompare.ng, so you get to keep your Payday loan below the radar. Though, if you repay your Payday loan as when due, it may help to improve your credit score, if it gets reported to the credit bureau. This means that it is not in itself a bad thing for the credit bureau to have your loan record, it only becomes a negative factor when you miss your repayment or put differently when you default on the Payday loan.
Interestingly, whilst your lender may not submit your loan record to a credit bureau, if you default, debt recovery agents, who are often hired by the lender to chase borrowers for repayment, often turn the records to credit bureaus, as one of the ways to embarrass and pressure the defaulter to fulfill his/her obligation.
You should feel free to search for various Payday loans on nairaCompare.ng, as having access to options gives you the opportunity to decide whether you want to borrow from a lender that renders your record to the credit bureaus. Anyway, whichever decision you make, nairaCompare.ng would be with you on the journey to search for the loan that best suits your objectives.
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