Financing provided by UK direct lender Everyday Loans is incredibly popular, but some people worry that their credit score might be affected by an application. We take a look at the process.
We all need some extra cash every now and then, whether it’s to help pay for an unexpectedly large bill, a sudden car breakdown that needs a costly spare part or just to get you to the end of the month. Life is expensive, and our income doesn’t always meet our needs, so many people feel let down by their banks when they decline their loan applications.
This is why lenders like Everyday Loans have become so popular in the UK. The company bills itself as a “straightforward way for individuals to borrow money”, and like many such firms, Everyday Loans specialises in providing finance to people with bad credit scores. But unlike payday loan companies, they don’t have short-term repayment terms or the high fees associated with such financing.
Everyday Loans is a direct lender regulated by the Financial Conduct Authority. You can apply for a loan of between £1,000 and £15,000 and pay it back over a year or up to five years. Its loans are for individual use only, not to finance a business, and you can’t use the cash for gambling or anything illegal.
As an example, Everyday Loans says that if you take out a loan of £3,000 and pay it back over two years, the interest rate will be 71.3% and you’ll pay 24 monthly instalments of £237.75 per month, for a total sum of £5,706. So the loan will cost you £2,706. That may seem like a lot, but when you need cash and can’t get it anywhere else, such direct lending may be a lifesaver — and it’s spread over a term that makes repayments relatively easy.
But what about your credit score if you get financing from Everyday Loans? Will it be negatively affected and go down even more, leaving your history much worse off and putting you at risk of not getting a mortgage or other loans from banks in the future? Let’s have a look and see if an Everyday loan can impact your credit rating.
What Is a Credit Score?
When you’re applying for a loan or other financial product, such as a mortgage or credit card, financial institutions want to know what the risk to them is — as in, are you going to default and they will lose money? Banks are in the business of making money, and so they want to see how you’ve dealt with your repayments in the past.
Typically, they’ll use the services of the three main credit reporting agencies in the UK: Experian, TransUnion and Equifax, which provide detailed reports on someone’s financial history and give them a rating based on it. This is your credit score, and it can have an enormous impact on your financial life. As we know, you most likely won’t get financing from a bank if your credit score is poor and will have to turn to lenders like Everyday Loans instead.
It’s important to note, however, that credit ratings differ between the three reporting agencies, so if you have a low credit score with one, it could be higher with another. But do you know what your credit score is? Find out before you apply for a loan and other financial products, so you have an idea of how you’ll fare.
Credit reports are not just for financial institutions’ eyes; you are also entitled under the law to see them. Contact one or all of the three credit reporting agencies, either online or write to them, and simply ask them what your credit score is. Alternatively there are a number of free apps you can download that will provide your credit score. It’s a good idea to check your credit reports anyway, to make sure all your personal and loan information is correct; you wouldn’t want erroneous data to scupper a loan application.
Does an Everyday Loan Impact Your Credit Score?
There are different ways of carrying out credit-history checks, and they’re generally called hard and soft searches. The former are deep-dives into your financial history — looking at credit cards, loans and other financial products people took out and seeing how well they dealt with them, in terms of repaying and on time. This level of enquiry impacts credit scores, but the good news is that a soft search does not, and that’s what Everyday Loans may do.
(Also, don’t be concerned if you request your own credit report, as we recommended above; it has no impact on credit scores as it’s classed as a soft enquiry.)
“Most lenders still use the old fashioned ‘hard’ credit search. If you have a high number of these ‘hard’ search footprints on your credit record, this is likely to reduce your chances of getting credit because lenders use this data as one of the factors to help determine whether you are a good or bad risk,” Everyday Loans says.
If you find yourself unable to obtain a loan elsewhere and Everyday Loans are willing to lend you that much-needed cash, keeping up with the repayments can actually improve your credit score, by showing anyone who does a credit-history check in the future a consistent payment record.
So having an Everyday Loan in itself won’t negatively impact your credit score — in fact, they pride themselves on being forward-thinking in terms of your credit score, and it may help restore your credit score over time. But that’s only the case as long as you keep up with the repayments. As with any other lender, Everyday Loans will note a default on your credit file if you don’t meet one or more of your monthly payments.
What Are the Other Benefits of Getting an Everyday Loan?
There are other benefits of using this company for your financing needs. For starters, they’re not a broker that works with a number of lenders but are a direct lender; this means you won’t be charged a fee when you make a loan application.
Applying is a matter of doing it online, with no reams of paperwork involved. Everyday Loans say they will give an initial decision within “minutes” of receiving an application. And if you’re a tenant, like 4.5 million people in the UK, you can apply for an Everyday loan. As can people living with their parents and, of course, those who own their homes.
Plus, Everyday Loans’ customer service personnel are trained to work with people who have bad credit histories and help them as best they can to get financing, understanding that not everyone has a good credit score and can get easy access to financing from their bank or other financial institution.
“With everyday loans, you’re more than just a credit score. We look at your credit future, not just your credit history. Even if you’ve had problems with your credit score in the past, Everyday Loans may be able to help. You can apply online without affecting your credit score and receive a decision in minutes,” the company says.
If you’ve taken out an Everyday loan and perhaps others too, and find yourself in a situation where you’re having difficulty making repayments, Debt Movement is here to help. Request a free callback now, and you could soon be on a path to financial freedom.