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I had this article forwarded to me in email this morning:
http://www.dailymail.co.uk/money/car...tly-loans.html
While any new restrictions on the PDL industry is welcome what is depressing is the poor reporting with regard to the final paragraph and how the PDL industry is still trying to 'normalize' payday loans in that they are seen as standard financial products by the mainstream financial companies when they are not:
"Will a payday loan affect my credit score?
Not if you repay on time and can show you are not over-indebted. Credit expert James Jones, from Experian, says: ‘A payday loan repaid on time could be seen as a positive indicator.’
However, if people are relying on payday loans this will show up on any assessment carried out by other creditors, such as mortgage lenders."
What the article fails to mention is the following:
While taking a payday loan may not affect your 'credit score' remember that it is not the score that affects whether you get credit, but a lenders assessment criteria on the information held by the CRA's.
I warn repeatedly that there is a viscious cycle happening where people who struggle to get mainstream credit turn to payday lenders, which in turn makes it harder for them to get mainstream credit as the lenders in this market see the use of a payday loan as a sign of financial distress, which in turn drives them back to the PDL market.
http://www.dailymail.co.uk/money/car...tly-loans.html
While any new restrictions on the PDL industry is welcome what is depressing is the poor reporting with regard to the final paragraph and how the PDL industry is still trying to 'normalize' payday loans in that they are seen as standard financial products by the mainstream financial companies when they are not:
"Will a payday loan affect my credit score?
Not if you repay on time and can show you are not over-indebted. Credit expert James Jones, from Experian, says: ‘A payday loan repaid on time could be seen as a positive indicator.’
However, if people are relying on payday loans this will show up on any assessment carried out by other creditors, such as mortgage lenders."
What the article fails to mention is the following:
- That taking out a payday loan is seen by many lenders as a simple fact that someone IS over-indebted
- That almost all mainstream lenders DO NOT see a pay loan repaid on time as a positive indicator
- That almost all mainstream mortgage lenders will see any payday loan on a CRA report within the last 12 months as a red flag and sign of financial distress and so will reject an application during their assessment process
While taking a payday loan may not affect your 'credit score' remember that it is not the score that affects whether you get credit, but a lenders assessment criteria on the information held by the CRA's.
I warn repeatedly that there is a viscious cycle happening where people who struggle to get mainstream credit turn to payday lenders, which in turn makes it harder for them to get mainstream credit as the lenders in this market see the use of a payday loan as a sign of financial distress, which in turn drives them back to the PDL market.