Pay Day Loans - damage to your future credit rating

[orfoster]

So far I've compiled documents from the OFT which talk about misleading advertising.

[jjandbump]

I would love to do the same, it screwed my credit in to the ground x

[BRIGADIER2JCS]

Yeah they came back and said its a legal CCA matter so didn't think it was relevant for them.

This I do Not agree with. I have looked at some of the original advertising out of interest, and am of the opinion that the content was at least misleading on the premise that PDLS will improve credit rating, whereas the fact is well known that frequent short term high interest borrowing resulting in T1 searches of credit files has always had a dramatic downward effect on credit scores and a very long term effect too.

[Tawnyowl]

Some very interesting points being made.

Just wondering as many took these loans out believing they would

Improve their credit rating and paid them early or on time to find the

opposite to be true when applying for a mortgage how long does this affect them.

Could it be up to six years or even longer.

Costing them possibly thousands if house prices in certain areas keep rising.

And that very interesting question.Why did the CRAs start listing them separately.

This surely only leads to even more checks.Do the CRAs make money from the possible increased workload.

Someone knows the answer.I certainly do not.

But many people who have been affected must be fuming.

Just had a quick look round, Back in 2012 a article said it was some mainstream lenders who demanded this.

QUOTE.

Mainstream lenders have demanded the ability to easily analyse the use of payday loans (by getting the credit reference agencies to list them separately) and will find ways to use that information. Primarily they may be interested in whether people they have lent to recently, that have made recent use of payday loans, are more or less likely to pay them back as per the contractual repayment terms. If it turns out that they’re less likely to pay, in future that lender may reject such applications or perhaps simply not offer them the best-value credit products

 

It seems though anyone who has had a payday loan will struggle to get a mortgage

or if they manage to will end up paying a higher rate.You are not worthy, you will not pass go.

Charming.

[lordash]

Hi,

 

I have had seven of these loans reported from between 2010 and 2014. All green (0)s, paid off on time, no issues.

 

These were originally reported as "Personal Loans" on my credit file, but sometime in 2012 these were changed to "PayDay Loans". This included all the previous loans that I had already paid off!

 

I took out these loans to cover short-term expenses such as getting the car repaired, as I had no choice but to live in an expensive area where my salary only barely covered the rent and bills. I was unable to get credit from the bank as I had previous issues with my file (defaulted accounts). Now that the defaults have fallen off my file, my only negatives on my credit file are these loan entries, which will remain until 2020!

 

I have since moved to a different part of the country, where living expenses (and house prices) are much lower. As a result, I am a lot more financially stable and I have cleared nearly all my debt. However, no matter how much deposit I save, I will be unable to buy because of these loan entries on my file. Worse still, my employer may be credit checking me in the future, and these loans could cause an issue.

 

I have had four loans with PayDayUK, two with Money Shop and one with Cheque Centres. I do recall PayDayUK at least advertising that these loans could be beneficial to my credit report.

 

I do have to wonder why these companies are so determined to record data that they know is harmful against their paying customers. I understand recording of defaults and missed payments, but recording settled accounts against their paying customers when they know that these will be seen detrimentally by mortgage lenders seems counterproductive.

 

If there is a genuine legal basis for deleting this information, I would be very interested.

 

Thanks

[BRIGADIER2JCS]

Hi,

 

I have had seven of these loans reported from between 2010 and 2014. All green (0)s, paid off on time, no issues.

 

These were originally reported as "Personal Loans" on my credit file, but sometime in 2012 these were changed to "PayDay Loans". This included all the previous loans that I had already paid off!

 

I took out these loans to cover short-term expenses such as getting the car repaired, as I had no choice but to live in an expensive area where my salary only barely covered the rent and bills. I was unable to get credit from the bank as I had previous issues with my file (defaulted accounts). Now that the defaults have fallen off my file, my only negatives on my credit file are these loan entries, which will remain until 2020!

 

I have since moved to a different part of the country, where living expenses (and house prices) are much lower. As a result, I am a lot more financially stable and I have cleared nearly all my debt. However, no matter how much deposit I save, I will be unable to buy because of these loan entries on my file. Worse still, my employer may be credit checking me in the future, and these loans could cause an issue.

 

I have had four loans with PayDayUK, two with Money Shop and one with Cheque Centres. I do recall PayDayUK at least advertising that these loans could be beneficial to my credit report.

 

I do have to wonder why these companies are so determined to record data that they know is harmful against their paying customers. I understand recording of defaults and missed payments, but recording settled accounts against their paying customers when they know that these will be seen detrimentally by mortgage lenders seems counterproductive.

 

If there is a genuine legal basis for deleting this information, I would be very interested.

 

Thanks

 

 

The simple answer is no.

 

 

If the loans have properly reported to the credit reference agencies ( which they are required to do accurately and up to date) there is no reason lawful reason for the entries to be removed.

 

 

The Information Commissioners Office responsible for the Data Protection Act requires this.

[orfoster]

Hi,

Just a note to say I am going to meet with the FCA at their Head Office next week following an e-mail exchange with someone senior in the FCA about this entire thread and the FCA's investigation.

 

What I will say is there are some public research documents that support PDLs mislead customers about impact on Credit Rating.

 

I will let people know how I get on.

[citizenB]

---

 

Credit rating do not get affected simply by taking pay day loan - it gets affected when you fail to pay back the amount after the duration of loan.

 

Sorry, you are incorrect - it is widely reported that even where someone has repaid a PDL on time, it affects their credit rating. Please see the link in post # 2 of this thread.

[BRIGADIER2JCS]

---

 

Credit rating do not get affected simply by taking pay day loan - it gets affected when you fail to pay back the amount after the duration of loan.

Grossly incorrect, the sheer existence of a PDL on Credit Files will deter mainstream lenders, they are deemed to show inability to manage finances.

[StokiePotter]

Afternoon All,

 

Any update in regards to addressing the PDL entries on a Credit File?

 

Again, I am one of these who couldnt get a loan via mainstream as my credit file was shot (about 5 years ago) and found myself near on every month topping up my wages with a PDL and promptually paying it back once my salary went into the bank (I have ALWAYS paid when required, no missed payments at all).

 

The nice little puppets made the promise that it would "help" my credit.... guess what it hasn't, if anything it is the ONLY thing dragging me to my knees Im now 2/5 on noddle and EVERY other account is upto date with no missed payments.

 

I did complain to Wonga who sent we the usual response and added the following quote to their reply (this was last year)

 

"“as long as you repay the payday loan on time and in full then any effect on your credit rating is likely to be positive. When lenders check your credit report they are looking for evidence that you are a responsible customer. Repaying a payday loan on time and in full should therefore strengthen your case, because many payday providers are now sharing credit data. Saying that, some high street lenders might see the fact that you’ve resorted to payday credit as a sign that your finances are under pressure. Importantly, lenders’ scoring systems are built by modelling actual customer data. As a result, if a particular lender’s experience is that customers who take out payday loans are more likely to miss their repayments, this will be reflected in their credit scoring. Actually, some of the lenders that use Experian for credit checks don’t currently differentiate between payday and other types of loans, so they wouldn’t be able to discriminate anyway. So if you do take out a payday loan, just concentrate on paying it back on time and you shouldn’t hopefully have any problems”. "

 

HELP..... :-/

[BRIGADIER2JCS]

Afternoon All,

 

Any update in regards to addressing the PDL entries on a Credit File?

 

Again, I am one of these who couldnt get a loan via mainstream as my credit file was shot (about 5 years ago) and found myself near on every month topping up my wages with a PDL and promptually paying it back once my salary went into the bank (I have ALWAYS paid when required, no missed payments at all).

 

The nice little puppets made the promise that it would "help" my credit.... guess what it hasn't, if anything it is the ONLY thing dragging me to my knees Im now 2/5 on noddle and EVERY other account is upto date with no missed payments.

 

I did complain to Wonga who sent we the usual response and added the following quote to their reply (this was last year)

 

"“as long as you repay the payday loan on time and in full then any effect on your credit rating is likely to be positive. When lenders check your credit report they are looking for evidence that you are a responsible customer. Repaying a payday loan on time and in full should therefore strengthen your case, because many payday providers are now sharing credit data. Saying that, some high street lenders might see the fact that you’ve resorted to payday credit as a sign that your finances are under pressure. Importantly, lenders’ scoring systems are built by modelling actual customer data. As a result, if a particular lender’s experience is that customers who take out payday loans are more likely to miss their repayments, this will be reflected in their credit scoring. Actually, some of the lenders that use Experian for credit checks don’t currently differentiate between payday and other types of loans, so they wouldn’t be able to discriminate anyway. So if you do take out a payday loan, just concentrate on paying it back on time and you shouldn’t hopefully have any problems”. "

 

HELP..... :-/

I have relative who works for a high street bank in the retail credit control, i.e. who gets what and for what % rate.

 

 

The banks and other lenders he tells me view the use of PDL as being an indication that an individual is not in control of their finances and the more the individual uses PDLs there greater the detrimental effect.

 

 

The one such loan paid back on time May not have any adverse effect or may possibly seen as OK, but one every month will trash credit profiles for a long time.

[247orbital]

Here's my 10 pence worth on payday loans.

 

In my opinion they can be used to boost your credit rating/score but ONLY if you have poor credit to start with.

 

I had a bad credit history but over the course of about 3 years and with the help of this site and others, I cleaned it up. I now have a credit score with Experian which ranges from Good to Excellent. My first step was to deal with the DCA's who will all know will resort to all sorts of underhand tactics to extend the life of a debt.

 

Once this was dealt with I looked into easing myself back into credit. My first step was the Cash+ builder pre-paid card. Which worked wonders. More on the Cash+ card later.

 

I then applied for a Very catalogue which I was given intially a credit limit of £1200 this is now £2500.

 

Next an Aqua card with a £750 starting limit now increased to £1000.

 

Then a K catalogue again with a £1200 limit, but I hardly use this account.

 

Next I was offeed a Cash+ credit card with a £750 limit.

 

Now onto the PDL.

 

I also genuinely read that a PDL in my case from Wonga would help my credit score. So I applied for the maximum of £400. I didn't even spend it and repaid it 1 week early. This was in January 2014.

 

In late July this year I applied for a £8000 car loan which was granted.

 

A PDL of 1 or 2 maximum a year will not in my experience effect lenders decisions on future credit applications (mortages aside). If you are taking out a PDL every other month then this of course would alarm lenders. Mortgages are different its often peoples largest purchase in life. I was assured by a broker friend that if you had a PDL in any frequency in the last 18 months you are highly likely to be rejected for a mortgage. However the same would be for transactions on your bank statements to betting websites. The broker assured me the most important part of any credit file is the last 18 months to 2 years.

 

Regarding betting websites and the foot print left on your credit file searches and bank statment transactions. Heres how my broker told me to avoid the footprint.

 

Use your Cash+ pre-paid account, upload from a bank account which has minimal use to the card, use the Cash+ card to load the online betting account. Any winning sums will be reloaded back on to your Cash+ card then you can download the card balance back to your account. The only transactions shown would be from Cash+ and no betting accounts will be shown on any bank statements. Thus keeping your credit file and most importantly your bank statements clean for any future mortgage applications.

 

I have recently transfered my Aqua balance onto a Tesco credit card and closed the Aqua account. I have also recently recieved a Santander credit card and also opened a business account. This is all within 9 months of the PDL from Wonga.

 

I'm not endorsing PDL in anyway but used in the right way they can help in rebuilding credit. But if you are even thinking about a mortgage in the next 2 years don't touch one. In fact my advise is to stay clear of them if you can.

[citizenB]

Interesting 247, thanks for that information

[perplexedofdorset]

Sorry to butt in...Brig darling..your inbox is full x

[247orbital]

Seems Wonga are writing off £220 million of debt. Surely that not sustainable financially.

 

http://www.standard.co.uk/business/business-news/wonga-writes-off-debt-of-330000-customers-9769003.html

 

As I'm not applying for any more credit for the next 18 months, I've just taken out another Wonga loan as an experiment. I'll pay it back early again and see what effect it has on my credit score. I'll keep everyone posted.

[citizenB]

http://www.consumeractiongroup.co.uk/forum/showthread.php?433969-***********Wonga-Writes-Off-330-000-Customers-Debts*****************

 

Yes, they are writing off those debts that would be classed as irresponsible lending. Looks like the FCA really are determined to crack down.

 

 

The Financial Conduct Authority has taken the unprecedented step of making the short-term lender cancel the outstanding debt of 330,000 borrowers and scrap the fees and charges of 45,000 more.

 

[Ell-enn]

I wonder if they're going to update the credit reports of those who's debts are written off ?

[citizenB]

I wonder if they're going to update the credit reports of those who's debts are written off ?

 

I would hope so, Ellen.

[HLN]

Hi Guys,

 

This thread makes for a very interesting read - I'm here as many people are, looking at getting a mortgage but had previously taken a few PDL's from Wonga between 2011-12 in order to improve my credit file and wanted to know a little more about it and how it effects me now....not very well it would seem! Little angry that it has the complete adverse outcome than what I was hoping for. Just have to see what happens when I make a mortgage application!

 

Really sorry if this has already been posted and I've missed it however, here's a copy of a payment reminder I received from them which shows their true angle on how they advertised that a Wonga loan would boost your credit rating as I know a few people in the earlier pages were looking for past correspondence/advertising.

 

From : theteam@wonga

Date : 27/04/2012

We hope your cash advance was useful! We know how hectic life can be, so this is a reminder that we will be collecting £47.30 from your debit card on 30 Apr 2012. Please ensure enough funds are in the bank account linked to that card as a failed collection would result in a missed payment fee of £20, which is the last thing we want to happen!

 

You should also be aware that if we cannot collect full payment from 5am on 30 Apr 2012, we will make further attempts to collect the money from your debit card, either in one payment or in several amounts, on a continuous basis until the amount you owe is repaid.

 

Keeping our trust

 

As soon as we have taken your repayment, you`ll be able to apply again next time you need a short-term cash advance and keeping your promise means your Wonga trust rating will increase. This improves the likelihood of future approval and boosts your credit limit. Also remember that repaying your Wonga loan on time does wonders for your credit rating!

 

What if my circumstances have changed?

 

If you know the full amount will not be available for an unexpected reason, you can extend your loan for up to a month from the current promise date.

 

Login to Wonga at least a day before repayment is due, click the MyAccount tab and then select `Extend my loan`. A part-payment of the existing balance is required and an Admin fee will apply if approved.

 

Remember the sooner you repay your loan the less it will cost, so if you don`t need to extend we will automatically collect the repayment first thing on the agreed date and look forward to being of service in the future!

 

 

Regards from the customer service team

 

0207 138 8333

 

 

Wonga.com is a trading style of Wonga.com Ltd. Registered in England and Wales. Registered Number: 6374235. Registered Address: 88 Crawford Street, London, W1H 2EJ

docref[ColRemd]

[citizenB]

Thanks for this HLN

[Nao]

And with Wonga having to openly admit to irresponsible lending it is highly likely that the damage of having PDLs on a credit record has escalated to complete obliteration of any chance at credit as the industries reputation has taken a very heavy blow...

[citizenB]

Wonga have brought this upon themselves.

 

They were too quick to lend money with minimal or no checks. They then allowed, encouraged even - rollovers in order to maximise profits.

 

They must have been very aware that people were struggling and that the original loans should not have been given.

 

On another note, It is quite worrying that some borrowers have openly admitted they gave incorrect information, knowing they would be unable to repay. However, had Wonga or any other PDL, made the correct checks - then perhaps they wouldn't have made these loans.

[BRIGADIER2JCS]

A neighbour asked me to look at a mortgage application questionnaire handed out by a lender, this 4 A4 pages 20 questions per page the usual intrusive ( to the point of being offensive) questioning.

However a question highlighted printed bold asks.

" Have you at ANYTIME ( no further time scale mentioned) applied for or received a pay day loan".

This comes in the section regarding existing and settled credit accounts including mobile phone/ catalogue and other unsecured credit/service accounts.

[maroondevo52]

I wonder if they're going to update the credit reports of those who's debts are written off ?

 

2.5.7 What if my credit rating has been impacted by your historical debt collection practice ?

 

We recognise that due to this historical debt collection practice, the credit rating of some customers may have been unduly impacted. Where this is the case, as part of the compensation and refund offer, Wonga or the current owner of your debt will contact the relevant credit agencies and request that credit ratings are amended accordingly.

[citizenB]

Thanks for that marooned, it answers the question - can you please provide a link to the quote