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Can applying for online loans damage my credit score?

These days, we are so lucky, as consumers, to have such an in-depth choice when it comes to taking out an online loan. Most borrowers will spend time shopping around. They continue until they feel they have found a lender that offers the kind of loans they are looking for. However, it is impossible to know for sure. Whether you will be accepted, or how much you will be offered over what time frame until you have actually applied. Can applying for online loans damage my credit score?

Can applying for online loans damage my credit score? It’s Problematic.

This is where the problems can begin for some. Every time you apply for a loan, a hard search goes on your credit record for a limited time – usually two years. This can impact your credit record negatively, but usually only slightly. When you make repayments to a loan or act in other financially responsible ways, you can improve your credit score, quickly repairing any damage done during the application process.

Advice

So, the best advice is to limit the number of online loan applications you complete, as each will usually have a negative impact for at least a while. Lots of applications in a short amount of time could make it difficult for you to secure credit in the future. With this in mind, here is our guide to limiting the impact of an online loan application on your own credit score.

Check Your Credit Score

There are a number of credit reference agencies that all carry slightly different credit scores for you. You can often find out your credit score for free by signing up to a free trial or you may want to pay a small fee to access your information. This service allows borrowers to see their credit record, or at least some of their credit information, which will give them some indication of whether their credit score is healthy or if it needs a little work.

Can applying for online loans damage my credit score? Reports

Many of these CRAs will show you whether your credit score is excellent, good, fair, or needs improvement. You will also be able to see how much you owe across your various forms of credit and whether your score has increased or fallen in recent times. This may help you to see if your score has been damaged as a result of applying for loans.

The fact that this type of information is available so readily is a major advantage to consumers looking for loans these days. It makes sense to arm yourself with as much information as you can before embarking on your loan journey to minimise the risks involved.

Can you afford the total payable and the repayment schedule?

When a lender makes its decisions, it is not just looking at your credit record, but also other financial factors that might have an impact on whether you can afford to make the repayments. For payday loans, for example, responsible lenders will check when your next payday is and how much you earn. They will also ask about your employment status and how much you pay out each month in regular costs such as rent, groceries, bills and servicing other loans.

Can applying for online loans damage my credit score? Check Carefully. 

It is vital that you take a look at these figures yourself and work out whether you will be able to comfortably repay the loan over the instalments you have agreed. In the case of a traditional payday loan, you may be asked to repay the loan in full on your next payday. If you do not really believe you can do this and still have enough left over to get through the following month, then a payday loan is most certainly not the right option for you.

Is this the right lender?

One more way to minimise your chances of being turned down for a loan is to ensure that the lender you are applying to offers the kinds of loans you need. If you need to repay a loan over several months, do not apply to a traditional payday lender who will ask for a lump sum repayment. If you need to borrow several thousand pounds, make sure your lender offers significant personal loans and that you can afford to repay the entire sum over the number of months required. Every lender offers something slightly different, so take the time to do some research and find out whether your lender works for you.

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