Will taking out lots of short term loans improve your credit rating? Payday loans net looks at the pros and cons of using short term credit to improve your credit rating, plus a look at the dangers involved.


If you are one of the many who have a bad credit score – sometimes through no fault of their own, then it can be difficult to find loan lenders that are eager to lend you money. This is not always the case with payday loans. It’s possible to find lenders who accept applications despite having a poor credit history or very low credit score. Payday Loans Net is one such company, and you can apply with PDNET for a short term loan with bad credit.

Short term loans have a pretty intense reputation. They can be ideal for emergencies. However, they aren’t so great if you have no way of paying them back. If your financial circumstances continue to change during the term of the loan, you might find that you are unable to stick to the loan terms. Then, you may end up being charged far more than you agreed on, and could even get taken to court.

Your Credit Rating Explained

Just so we’re clear: your credit rating is something that indicates how likely you are to meet your financial commitments. Having a good credit score shows that you are on time with your bill payments and have repaid your debts on time.

If you have a poor credit score, it may be because you make late/missed payments. You will also get a bad credit score if you have taken out a lot of credit in the past, or applied for a lot of credit without leaving breaks in between.


Short Term Loans And Your Credit Rating

Small loans can impact your credit score both positively and negatively depending on how you handle the loan. By providing evidence that you are a responsible borrower who can make timely payments, you can improve your credit score easily. This shows potential borrowers that you can manage your money well. This is what they need to know if they are going to lend to you. All you need to do is to make sure to repay your loan on time, in full. On the other hand, if you cannot stick to your loan terms and miss payments, then your credit score is going to suffer.

However you have dealt with your loan, it will usually show up on your credit report. If you have multiple payday loans on your credit report, it could suggest that you are having problems with your finances. Even if you have paid off your loans in full, a mortgage advisor, for example, could see them and ask you about them. It could impact whether lenders accept you for a mortgage or not, as it looks as if you are living beyond your means.

Why is it Important to Have a Good Credit Score?

For most people, loans are a necessary part of our lives. Maintaining a good credit score, and working on building your credit history can affect your quality of life in various ways, including when you apply for any type of loan. Typical examples of when your credit score is analysed are:

Buying a house

Buying a carGetting Hired
Despite that the housing market has bounced back, the bank are still hesitant to lend. They have further tightened their requirements for getting a mortgage. If you aren’t yet ready to buy a home, in many cases, a property owner will perform a credit check before leasing their property. If you cannot afford the full cost of a car, you will need a loan to assist you. Car loans are easier to get even with a lower credit score, as they are not as large as house loans. Still, the lower your credit score, the smaller down payment you will be able to get. In addition, and you might only qualify for higher interest rates. It is a legal requirement in the UK for employers in the financial sector to perform a credit check on potential employees. It has become more common for employers in other sectors to do so too. A low score or a bad credit history could prevent you from being hired.

If you pay back your loan on time, and you don’t default or overlook repayment, your credit score won’t be harmed. In the event you default on repaying your loan, then not only will your credit score decrease, but also the rates of interest when you take a loan will increase for you. So, the longer you take to settle a loan, the greater the interest becomes. By repaying the full amount on time, you are increasing the odds of a receiving a loan in the future, and moreover, you will increase your credit rating.

Soft Credit Checks

Although many loan providers boast of something called a ‘soft credit check’ that don’t make an impact on your credit rating like a regular credit check, it can still leave a footprint. Even if you choose not to take out the loan, it will show that you applied. Eventually, the mark will disappear, say after 12 months, but they will still be there at first for all to see.


Considering that, no credit check loans companies do not carry out any credit checks. This makes them an attractive choice for those with bad credit. Not only does it mean just about anybody will be accepted, it means that the application process won’t show up on your rating. That being said, the APR will usually be sky high.

Some people decide to take out a loan that they don’t really need, to improve their credit. Taking out this kind of loan can diversify your credit, and providing you pay it back as agreed, it could quickly improve your score. This can help you to get better rates for things like credit cards and bigger loans in the future. However, there may be more viable options to look at before you choose a payday loan.

The Dangers Of Taking Out Short Term Credit

Before you take out a short term loan, it’s so important to know the dangers.

  • The APRs of these loans are much, much greater than regular loans. If you miss a payment, the APR could rise, and you may even get a fine. Being able to calculate the APR is crucial, so use an online calculator to help you.
  • There’s also the danger of ‘Refinancing’ your loan. This is where people attempt to pay off a loan with another loan. Almost always, this method simply ends up snowballing their debt into an amount that they cannot realistically manage.


Even if you are sensible and pay off a that you took out for an emergency, it could affect you. While it might make your credit score improve slightly, it could also mean that mortgage lenders and other important people look at your credit score and think you are struggling financially.

Should You Take Out A Short Term Loan?

You should only apply for a short term loan if you’re sure you need one and that you’re going to take it out. If you’re just playing with the idea, and it isn’t an emergency, you should forget about it. It isn’t worth the interest you’ll pay back or the potentially damage it could do to your credit score.

You should wait at least three months in between applications, according to advisors, if you plan on applying for multiple loans. Applying for too much at once will have a detrimental effect on your credit rating.

If you don’t have a steady income, then you should never apply for high-cost short term credit. You never know what might happen.

How To Improve Your Credit Rating

Bear in mind that there are various ways to improve your credit score without taking out a short term loan. Simply looking at your credit rating to ensure there are no mistakes could help you to improve your rating rapidly. Paying off credit card debts could also help. Make sure you know how much money you have coming in, and set up a budget so you can make all of your principal payments on time.


PUBLISHED BY
Chloe Winters
Chloe grew up in the countryside, but came to the city to pursue a career in economics. She fell in love with the abundance of shops, and quickly developed a passion for fashion. After blowing her first salary on a shopping spree, she realised that budgeting is the only way to go. Now, Chloe is a budgeting queen – and still manages to dress like a superstar. She loves sharing the advice and tips she gained along the way, and is excited to be part of the Payday Loans Net blogging team. Her advice to you: If I can do it, anyone can!

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