We are all aware of the bad listings on a credit file that automatically make it harder for you to get a loan. Overdue accounts (also called defaults), court actions (whether paid or unpaid), late payment indicators and excessive recent enquiries (more than 5)  will negatively impact your credit score.

But there are some other bad listings that no-one really talks about that also affect your ability to get credit. These are enquiry listings or applications to certain types of credit providers. These listings are a BIG. RED. FLAG. to prospective lenders.

pig-2Probably the biggest culprit is the mention of a payday lender on your credit file. Payday lenders loan small amounts of money at very high interest rates to consumers who have a short-term cash crisis (just think Nimble, Cash Converters, Cash Stop, GE Latitude). I’m sure you know of cases where a short-term cash crisis becomes a long-term cash crisis – when the interest rates and fees that high risk lenders charge ensure that you, the consumer, can never quite pay back the loan, and have to keep accessing these loans to survive.

If a credit provider sees a high risk lender’s name on a credit file, this will create problems getting a loan. This is because lenders see the fact that you have taken out a payday loan as a sign that your finances are under pressure. Lenders’ assessment systems are built by modelling actual customer data, so 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.

Some words of advice: when applying for credit always avoid high risk lenders. Even making an enquiry for a loan with one of these companies will reduce your score and make it less likely you will be approved for finance.