How can payday loans affect your credit report?

Learn how payday loans are listed on your credit report and how they can impact your credit score.

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Like most forms of credit, applying for a payday loan will have an impact on your credit score. Any application for a loan (whether approved or denied) and information including how much you borrowed, repayments and any defaults are listed on your credit report. Use this guide to for answers to commonly asked questions about payday loans and the impact they can have on your credit report.

Financial hardship


If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call the Financial Counsellors hotline on 1800 007 007. It is open from 9:30am to 4pm, Monday to Friday. When comparing short term loans, ensure you take into consideration any fees, charges and rates you may be charged. It's important to weigh up all your options before applying for any form of credit.

⚠️ Warning about Borrowing

payday-warningDo you really need a loan today?*

It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:

  • For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
  • Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
  • If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94

The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.

Do payday loans actually go on my credit report?

Yes. Your credit report is a detailed record of your credit history and will include details of any payday loans you have applied for or taken out.

How do short term loans appear on my credit report?

Your credit report has three sections: consumer credit information, commercial credit information and public credit information. Any payday loans you apply for or take out will be listed in the consumer credit section. The following information will be visible:

  • Credit inquiry. Every time you make an application for a payday loan or any other type of credit, the inquiry will be listed on your report.
  • Type of credit. This will be listed as a personal loan on your credit report.
  • Account terms. The opening date and closing date of the account will be listed.
  • Credit limit. This is the amount borrowed on the payday loan.
  • Payment history. The payment information for your loan will be shown, including whether you made your payments on time.
  • Defaults/overdue accounts. If you miss a payment and your account goes into default, this will be listed on your credit report.

How do banks consider borrowers who have previously taken out payday loans?

When assessing an application for a line of credit, lenders will review the applicant's credit report to understand their financial habits and determine their risk as a borrower. The assessment criteria will vary between lenders but they may consider factors including the number of credit inquiries, the active credit accounts, credit limits and any defaults listed on the reported. How banks will consider applicants who have used a payday loan in the past will depend on their credit history as a whole.

According to an ANZ spokesperson, "There is no direct impact on a customer's ability to take out a loan. However, if the customer has a very active credit report from multiple credit checks undertaken by payday lenders, this may factor into our decision. Generally, credit scores can be negatively impacted by multiple inquiries from potential financiers. ANZ uses credit scores when assessing customer applications."

Similar sentiments were echoed by both NAB and Westpac. A spokesperson from NAB said, "NAB treats all potential and existing customers consistently and assesses their ability to access credit on a case-by-case basis regardless of whether they have taken out a 'payday' loan or not."

Westpac also said that previous loans were taken into account, but that this was "not specific to payday lenders".

Will banks not approve me for credit if I've taken out a short term loan?

As outlined above, payday loans appear on your credit report as personal loans and may be treated like any other loan when a bank is assessing your suitability as a borrower. However, as outlined by Belinda Diprose, marketing manager at Equifax, the weight placed on a payday loan when it comes to "risk factors" for your credit score would be different to other types of loans.

How can payday loans help my credit score?

As long as the borrower is making repayments on time and can repay the loan in full during the agreed term, a payday loan could demonstrate good credit habits and have a positive impact on your credit score.

How do payday loans negatively impact my credit score?

If you apply for several payday loans in a short time period or apply for a loan and are rejected, this can have a negative impact on your score. A payday loan can also injure your credit score if you don't make repayments on time or default on the loan. If you have several other active credit accounts open and apply for a large loan amount, this could also hurt your credit score.

To see how a payday loan or other accounts in your credit history have impacted your credit score, you can request a free copy of your credit report through Finder.

Common mistakes to avoid with a payday loan

If you're comparing payday loan options, you should consider the following factors and learn what mistakes you should avoid before applying.

  • Taking out too many loans. Once you have repaid a payday loan, you may be tempted to take out another one. But taking out several small amount loans may signal to prospective lenders that you are not in a stable financial position. It doesn't matter if you are repaying the loans on time, the fact that you're takeingout so many loans may be a red flag to lenders.
  • Not making your repayments on time. Repayment history is listed on your credit report. This makes it more important than ever to make your repayments on time. Any missed or late repayments will be listed on your report and will be able to be seen by any lenders that look at your report for two years.
  • Making several applications in a short space of time. As well as taking out too many loans, you should avoid making too many applications within a short time period if you aren’t approved for a payday loan. All applications and account opening dates are listed on your credit report, so lenders can determine whether you were approved based on your applications and how many accounts were opened. Making several applications can indicate that your finances aren’t in good standing. If you've applied for a line of credit and been rejected, you should spend a few months repaying any existing loans and improving your credit score before you apply for another product.
  • Not checking your credit report. When making loan applications online it helps to stay on top of your credit report to watch for identity theft. It’s also important to check that the loan is being listed correctly and also to see what your current situation looks like to lenders that do check your report.

Like all types of credit, it's important to repay your payday loan on time and avoid for applying for too many products in a short time period. If you want to more tips to keep your credit history in good health, see Finder's guide to improving your credit score for more.

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6 Responses

  1. Default Gravatar
    Capt29August 26, 2017

    How long does a pay day loan stay on your credit file?? It was all paid on time and no issues buts it’s been a year and it’s making my credit score really low

    • Default Gravatar
      ArnoldAugust 27, 2017

      Hi Capt29,

      Thanks for your inquiry.

      Any positive information on your credit report can remain there indefinitely. An account that was paid as agreed will likely be removed from your credit reports 10 years after the date of last activity.

      Hope this information helped.

      Cheers,
      Arnold

  2. Default Gravatar
    RobertNovember 11, 2016

    Hi,
    Just a quick question. For how long do short term loans stay on your credit files?
    I also have had CCJS from 2010 and now is gone. 6 years on my credit file.
    So is the same with short terms loans?

    • Avatarfinder Customer Care
      JasonNovember 11, 2016Staff

      Hi Robert,

      Thank you for your enquiry.

      Any credit enquiries will be listed and held on your file for 5 years and payment history information will be held for 2 years.
      Please click this link for more information on the types of listing and for how long they will be held on your file.

      Cheers,
      Jason

  3. Default Gravatar
    CruzeMarch 29, 2015

    How’s my cash train loan going

    • Avatarfinder Customer Care
      ShirleyMarch 30, 2015Staff

      Hi Cruze,

      Thanks for your question.

      If you decide to apply for a product or service through our website you will be dealing directly with the provider of that product or service and not with us.

      Please contact Cash Train directly to enquire about the status of your application.

      Cheers,
      Shirley

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