If you’re considering taking out one of our short term loans, you may be wondering how short term loans effect your credit score. As with any type of credit, a short term loan will appear on your credit history and can have an effect on your credit score. Whether short term loans effect your credit score in a good or bad way will depend on the circumstances around the credit application and a few other factors.
When you apply for short term loans or same day loans with QuidMarket, we ensure that you are fully aware of the terms of the credit application, including how long you have to pay the loan back and what the interest rate or APR is on the loan. If you’re interested in our short term loans, it’s a great idea to contact us today to find out if our short term loans are suitable for your needs.
It’s best to stick to applying to one financial lender at a time and to avoid making multiple applications for a loan or credit in a short period of time. Too many rejected applications for short term loans effect your credit score and remain on your credit file’s history for some time. You may see a reduction in your score, which takes time to reverse and will require some positive credit efforts on your part.
What Happens When You Apply For Short Term Loans?
In the first instance, after applying for a short term loan from a financial lender like us here at Quid Market, a soft search will appear on your credit history file.
This soft search shows that a financial lender has received your application and asked to take an initial look at your credit history. It’s not a full check, but it will allow the individual helping with your loan application to determine what your current credit is like, including any credit you currently have.
The details a financial lender obtains from a soft credit check are very minor. It’s mostly personal details to help them check that you are who you say you are, as well as a look at your current credit to see what your financial situation is like at present.
Can You Borrow with Bad Credit?
If you have bad credit or a low credit score, you may find that it’s more difficult to be approved for things like short term loans, payday loans, and same day loans. However, bad credit loans do exist and private financial lenders (not banks or building societies) may be more willing to help you with your financial needs should you have a low credit score.
It’s vital that you understand how a short term loan will effect your credit score if you already have bad credit on your credit file.
What Happens If You Don’t Repay Your Loan On Time
Once you have your loan set up with us or any financial lender of your choosing, you’ll be given a choice of ways to repay your loan. The most popular is a monthly payment made via direct debit, which is paid directly from your current account to the bank details given to you to make repayments.
This is an automated payment that will come out of your account on the same day every month and will keep your repayments up to date until the end of your credit agreement when your loan is repaid in full (plus the agreed interest amount).
No further action is needed on your part if you have an authorised direct debit set up to repay your short term loans. You can, of course, choose to make more repayments. But you should check the terms of your agreement for any early repayment fees that could occur if you choose to repay your loan in full before the end of the contract between you and your creditor.
We understand that having a loan can feel stressful but it’s crucial that you do not cancel your authorised direct debit or miss a repayment before you talk to us or your other financial lender. By cancelling your direct debit without notifying your creditor, you could be breaching your contract. If you contact your creditor first, you can discuss lowering your monthly repayments for a short period of time.
Missing repayments should be avoided wherever possible. Missed repayments or failure to repay your loan by the agreed-upon date will have a negative effect on your credit score and may stop other financial lenders from approving your short term loans in the future. This is how short term loans can effect credit scores badly.
How to Fix Low Credit Ratings After a Loan
Once you’ve paid back your loan in full, it can take some time for your credit rating to recover. Short term loans effect credit scores throughout the lending period if you are using the maximum amount of your credit through that loan.
When you max out your credit, your credit score automatically lowers. It will also reduce if you’re using a high amount of your full available credit – for example, if you have a short term loan and a credit card and you’re using more than 25% of the credit available for you to use, you’ll see that your credit score starts to slip down until you’re using less than 25% of your full credit.
Because of this, you might not see your credit score rise again until after you’ve paid your loan back and you can expect it to take a few weeks to update.
If your short term loan effects your credit score more than you’d like, it might be time to try building your credit score. You can do this by making regular repayments on credit cards and short term or payday loans, not using too much of your credit at once, and keeping your personal details up to date.
You should also check whether you’re on the electoral register or not and avoid opening any new bank accounts.
Here at QuidMarket, we may be able to offer applicants with low credit scores a loan in an emergency with our same day loans and short term loans. Contact us today to find out more or click the apply button on this page to start your application.