A payday loan could potentially remain on your credit report for up to seven years. This only applies if you default on your loan and don’t repay it. Negative information remains on your credit report for up to seven years, and bankruptcies remain for ten years.
Credit reports are designed to show your history of borrowing and money management. They track your payment history, all your loan and credit accounts, new accounts you open, and how long you’ve been using credit. They compile this information and it’s used to give you a “credit score.” This is a three-digit number that represents your credit and money management history. Borrowers with high scores are considered more “creditworthy” since they’ve exhibited good financial habits. A low credit score tells lenders, banks, and financial institutions that you have done a poor job managing your money or making payments on time. Thus, you may not be able to get certain loans or credit cards very easily.
It is very important to avoid negative marks on your credit report. Having a low credit score not only makes it more difficult to receive loan approval, it also makes life more expensive. Lenders prefer to offer loans to borrowers who they can trust will repay them. In order to compensate for the extra risk with low-credit borrowers, they raise their prices. What this means for you is that loans and credit cards and financial products will cost more if you have a low credit score.
Improving your credit score might not be easy, and it can take a lot of time and effort. But it’s worth it in the long run. A higher credit score will help you save money on interest rates, and receive access to loans, mortgages, and other products you wouldn’t have otherwise. Do your best to improve your credit score by always paying your bills and loans on time.