Payday loans are designed to bridge a short-term financial gap, which often occurs when an unexpected expense arises, such as a car repair bill or a broken boiler. If payday is still a few weeks away, a payday loan could provide you with access to anything from £100 up to £5,000, with most loans repaid in full on your next payday. Although, for more significant amounts, it is possible to extend the loan repayments across a period of up to 36 months.
What is a credit report?
When you apply for a payday loan in the UK, the lender will need to search your credit history using the information available on your credit report. This report contains a complete overview of your financial history for the last six years, including your bank accounts, credit cards, phone contracts, and loans, with information about all repayments made and those you missed.
Credit Reference Agencies manage these reports, and there are three operating in the UK. The various reports all have slight differences, depending on the information the various account providers send to the CFA’s. However, whenever you take out a new form of credit, make a payment or miss a payment, including those with payday loans, your lender will submit the information to the Credit Reference Agencies. The agencies will then use the information to calculate your credit score, with higher scores indicating better creditworthiness.
The details will show up on your various credit reports for six years from when the credit agreement began. Although this may seem daunting, your ability to make repayments on time is a factor that will contribute to your credit score, and managing your commitments well will positively reflect your financial responsibility to lenders in the future.
Why is a credit report so important?
The report includes your name, address, previous addresses, details of every account opened, their balances and your payment records, with a history that spans six years. It will be accessed every time you are looking to open a new credit account or to prove your identity, so it is important to borrow responsibly as late, or missed payments will not be viewed favourably in the future.
When you take out a payday loan, your loan details will be added to your credit report, so future searchers will show when you took out the loan, how much you borrowed, and whether you made repayments on time. If you miss payments, this could make it harder to obtain credit in the future, as potential lenders will see that you could not keep up with the terms of your credit agreement. Considering this information will be visible for six years, it is essential to always responsibly borrow if you do not want to limit your financial options in the future.
How long exactly will a payday loan stay on a credit report?
In general, all information relating to your payday loan will be visible on your credit report for six years from when you took out the loan. For example, if you take out a payday loan on 1st January 2022, the agreement will disappear from your credit file on 1st January 2028. After this date, it will be automatically removed from your credit report and will no longer show in any credit searches.
However, a loan with late payments may stay on your file for longer. For example, suppose you missed the original repayment date and made a new arrangement with the lender to repay the loan. In that case, it will be another six years before the loan will be automatically removed from your credit file. During these six years, the report will also show that the payment was late, which could impact your ability to obtain credit.
In addition, if a loan is referred to a debt collection agency due to payment arrears or complete non-payment, this agency will update your credit report. This can escalate, and if the loan is then referred to court after repeated non-payment, you may be issued with a County Court Judgement (CCJ). This will be displayed on your credit report for six years from the date of issue, so it could well extend beyond the original date anticipated when you borrowed the loan.
How long does a credit search stay on a credit report?
When you apply for a form of credit, such as a payday loan, the lender is likely to perform a soft search of your credit report, which will help them to assess the chance of approving your application based on the information you initially supply. This soft search will leave a mark on your credit report; however, it is only visible to you and will not have a negative impact on your credit rating.
In comparison, a hard search of your credit report will be completed once you reach the final stage of your application with the lender. This search will be visible to anyone searching your credit file, and it will stay on your report for 12 months from the date of the search.
If you apply for multiple forms of borrowing in a short space of time, this will lead to many hard searches on your credit report. These footprints could indicate that you are struggling to manage your finances, so too many hard searches could reduce your chances of being approved. Instead of diving into multiple applications, increase your chances of being accepted by using a broker’s services during your first application.
This is especially important when borrowing payday loans, as they should only be used in emergencies as a short-term financing option. If your credit report shows multiple payday loans or hard searches for potential payday loans, the consistency could suggest long term financial struggles.
How can I apply for a payday loan?
Applying for a payday loan is quick and straightforward with Cobra Payday Loans. All we need are a few details such as your name, address, income information and details of your regular outgoings. As a credit broker, we have partnered with more than 20 lenders, who are willing to offer loans of up to £5000, with repayments terms ranging from 1 month up to 36 months.
This means our customers can compare potential loan terms without filling out numerous application forms. The whole process is quick, smooth, and completely secure, and you will be able to choose a potential lender to proceed with your application in a matter of seconds. If approved, your loan could be sent to your bank account within minutes, with final availability depending on your bank’s processing times.
As a broker, we are regulated by the Financial Conduct Authority (FCA), and we are committed to offering our customers a transparent, fair and ethical loan service. Despite the loan application process being very quick, it is essential to remember that it is a credit commitment that will remain on your credit report for six years.
If you are struggling financially, consider whether you can keep up with your loan repayments. For additional advice, we recommend contacting the Money Helper, Step Change or National Debt Line, which all offer free and impartial advice.