There is a popular saying from the movie Forrest Gump, “Life is like a box of chocolates, you never know what you’re going to get.” A simple statement, but it is true! Life doesn’t always wait until payday and sometimes, you find yourself at Speedy Cash Canada discussing a loan to get you through.
But now you’re in the market to buy a new home and can’t help but wonder, “Will the payday loan I took out affect my ability to secure a mortgage? What if I want to buy a new car?” In today’s post, we will explore how your personal credit score is affected by short-term loans such as the ones provided by Speedy Cash Canada and other payday lending businesses.
First, let’s cover some background information: Trans Union and Equifax are the two main credit bureaus in Canada that gathers information regarding your payment history, current debts, and how long you’ve been using credit. Financial institutions use this information to determine whether you’re a risk if you request to obtain a loan for a big-ticket item such as a mortgage. If you have little debt, make your payments on time, and have been doing so for an extended period of time, your personal credit score should be in good shape.
Let’s now focus back on the main topic of this post; what if you had to take out a payday loan to help manage unexpected bills? Will that short-term loan restrict your ability to secure bigger loans from banks and other financial institutions? The answer, in short, is no!
Small, short-term loans such as the ones you can obtain from Speedy Cash Canada will NOT affect your personal credit score PROVIDING you pay them back on time. (More on that in a moment.) This is mainly because lending businesses such as Speedy Cash Canada is not required to report these types of loans to credit reporting agencies such as Trans Union and Equifax. So, pay your loan and its associated fees back within the required amount of time and you’re good to go!
The Government of Canada has provided a simple chart to better explain what happens when you take out a payday loan:
As you can see, it is always important to understand how payday loans work before you apply for one. They more you know, the less likely your credit score will be affected.
If you cannot pay back your loan, there are a few things you can do before you need to be concerned about your credit score. Read all about what happens when you cannot pay back your payday loan in this post, but if you still cannot pay back your loan it will likely be sent to a collection agency. The collection agency is then required to create a report for the credit bureaus, which in turn will affect your personal credit score negatively.