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Can I Get Payday Loans Removed From My Credit Report?
Payday loans are a popular form of short-term borrowing, with many people using these types of quick loans as a way to cover the cost of unexpected expenses. The term ‘payday’ is used as these loans are often repaid in full on the borrower’s next payday, although many lenders will allow payments to be spread across up to 36 months.
However, this convenience does come at a price, and payday loans are one of the most expensive forms of borrowing. It is very important to ensure you can keep up with the high-interest repayments, as debt can quickly get out of control, and potential missed payments will be shown on your credit report.
Even if your payday loan is repaid on time, having details of a payday loan on your credit report can signal to future borrowers that you have struggled financially. Of course, it also shows that you were able to keep to the terms of the agreement and act responsibly when repaying the loan. However, many borrowers do look for ways to have payday loans removed from their credit report.
How long will a payday loan stay on my credit report?
When you borrow a payday loan, it will remain on your credit report for 6 years before being automatically removed. However, if you roll-over the loan to repay the following month, a new agreement will be made, and the 6-year period will begin again. In addition, if you default on the loan and it is sold to a debt collection agency or if a County Court Judgment is issued, it will appear on your credit file for 6 years from the date of issue.
These missed payments can have a significant impact on your ability to obtain credit in the future, and you may find that it is very difficult to take out loans, credit cards, phone contracts, overdrafts, and even to get a mortgage. This is why it is so important only to borrow same day loans that you are sure you can repay. There are strict affordability rules set by the Financial Conduct Authority that payday lenders must adhere to.
Payday lenders and the FCA unaffordability rules
Any payday lender which is regulated by the FCA must lend to borrowers responsibly, which means they need to check that you can repay the loan comfortably. In addition, default charges cannot exceed £15, and interest and potential fees can not exceed more than 0.8% of the original amount borrowed. This means that borrowers will never repay more in charges than the amount of their initial loan.
Despite these rules, a person’s financial situation can change quickly, and the loan may become unaffordable. For example, you may have been forced to take out another payday loan to repay the original loan – a spiral that can lead to larger loans required each month. In addition, being unable to pay a household bill after repaying your payday loan is a key indicator of unaffordability. Ultimately, if you have to struggle financially and go without food or other essentials to repay the loan, it is likely to be deemed unaffordable under the FCA rules.
Can an unaffordable payday loan be removed from my credit report?
If the payday loan caused you ‘undue difficulty’ when struggling to repay the loan, in some situations, you might be entitled to a refund from the lender, and some loans can be removed from your credit report. However, the amount you may receive will depend on several factors, including your circumstances at the time of borrowing, the amount of interest added to your loan, and additional missed payment charges.
There are three key steps you will need to follow if you are looking for a refund and removal of the details from your credit history:
1. Ask the lender for information about the payday loan you borrowed.
2. If you feel that the payday lender did not act responsibly, make a complaint to the lender explaining why.
3. If the payday lender does not offer a satisfactory reply and an appropriate refund, you will be able to escalate the complaint to the Financial Ombudsman Service (FOS). Although, if the lender fails to respond within 8 weeks, you will be able to escalate to the FOS without having to wait for the lender’s response.
The Financial Ombudsman Service offers a free, confidential, and independent service, and they will be able to discuss your complaint and talk through potential issues before you begin the complaint process. If you would prefer a face-to-face appointment to discuss your payday loan issues, your local Citizens Advice office will be able to help.
Can an incorrect payday loan be removed from my credit report?
Perhaps the loan was affordable, but you are worried that the information on your credit report is incorrect? If you have performed a check of your credit report and can see incorrect information, you can ask for it to be updated or removed from the report completely.
You will need to raise a dispute with each of the credit reference agencies to explain why you think it is incorrect. They will then speak to the original payday lender to check whether the details recorded are correct. While this investigation is being completed, a note will show on your file to explain that the record may not be accurate.
Alternatively, if you believe that a lender has recorded incorrect details, you can approach them directly and ask them to update the records. They will investigate the issue, and if it is found that an error was made, your credit report will be updated.
Can I reduce the impact of a default on my credit report?
If the lender has operated responsibly and your credit report is accurate, it will not be possible to remove the loan from your credit report. If you have defaulted on a payday loan and are concerned about the impact, it will have on your ability to obtain credit. The following tips will help to reduce its impact:
1. Pay what you can until the loan is repaid – This shows that you are committed to repaying the debt, and once the loan has been repaid in full it will be marked as ‘Satisfied’ on your credit report.
2. Add a note – It is possible to add a note to your credit report, which will be seen by anyone searching your file. For example, if you could not repay the loan because you were made redundant, you can explain these circumstances.
3. Improve your credit score – Aside from the loan defaults, there may be other factors that are affecting your credit score. This can be improved by making sure your details are correct and that you are registered to vote.
Cobra Payday Loans – A responsible loan broker
As a responsible payday loan broker, we only partner with lenders who are regulated by the FCA. Our panel of lenders are committed to offering fair, transparent, and clear loans, and they will always complete thorough affordability checks on any loan applications.