If you have applied for a payday loan recently, whether accepted or not, it could cause a new mortgage application to get rejected.

When is it affected?

A payday loan can damage your credit record:

  • When you apply

  • When you miss a payment

  • When you apply to borrow more

Only borrow what you need and can afford to pay back. This will help you limit the negative effect on your credit record.

Are there any positive effects?

A payday loan may help improve your credit record if you do not miss any of your payments. This shows that you can manage your debt responsibly.

However, do not apply for a payday loan just to improve your credit record because:

When you apply

You get credit checked when you apply for any amount of money:

  • If your application is approved or declined: This leaves a mark on your record, but only to show you have applied for credit.

If you do not meet the lender's loan criteria, your application may also get rejected, so only apply for loans you are eligible for.

The more times you apply for credit in a short period, such as six months, the bigger the impact on your credit record.

When you miss a payment

Your lender could report your missed payment to credit agencies, potentially affecting any credit applications you make in the future.

Speak to your lender if you are having financial difficulties, do not wait until after you have missed a payment.

If you cannot repay the loan

Your lender will report repeated missed payments to credit agencies. The more reported the bigger the negative impact is on your credit record.

Your lender will contact you by post or phone when this happens. Tell your lender about your financial situation and they may come up with a repayment plan you can afford.

If you do not speak to your lender and you keep missing your payments, your details could get passed to a debt collection agency.

When you borrow more

Whether you apply through the same payday lender or with another, you go through a credit check.

Do not apply for another payday loan if you are already struggling to pay back your existing loan.

If you have cleared your payday loan and want to borrow again, think about what you can afford and if there are any alternatives you could use instead.