The tightrope of repairing a credit history

There is much controversy surrounding the short term loans industry, as always. And yet again, there are warnings coming from banking industries and financial authorities for individuals walking a tightrope in an attempt to repair their poor credit rating by staking an unlikely gamble towards the end of every month as payday approaches.

Although the austerity drive has much of the country striving for every penny they can earn, this is not true of the whole population. There are sectors of industry harbouring individuals who have seen the worst of the global crisis, have been scarred, but are now over the worst. It is those individuals who are turning to the instant cash loan sector, ironically an institute that perhaps wouldn’t have eased their overall burden in troubled times, to help not just paint over the cracks but well and truly polyfilla them in.

One industry insider has reported instances of a new trend for those suffering poor credit ratings due to the recent downturn but are now starting to see some affluence returning to the coffers. Individuals who are beginning to have spare money at the end of every month are using this extra cash as a sacrificial lamb to turn short term loans to their advantage.

The way they are doing this simplistic way of correcting their credit rating is, as each payday approaches (we’re talking just a few days, here), check to see how much cash they have left in their account (and make sure that there’s nothing left to leave) and then head off over to the online provider of their choice (or compare short term loans to see who’s the cheapest at that time) and then take a very short term loan out. The amount of that loan is for the base sum they are actually borrowing plus the interest, which they work out using sliders to exactly mirror the cash they have left over from the month before.

The money borrowed is left untouched, and then claimed back by the instant cash loan firm on payday along with the interest, i.e. the amount they have put aside from last month’s wages.

They start the next month as they would any normal month and, providing that they remain in credit or are not tempted to touch the money they have borrowed from the instant cash loan company in the few days it’s in their account, all they’ve lost is the few pounds in interest (and it really is not that much on a small amount over a very few days), and they have made a payment which will reflect positively on their credit score, whilst having no adverse affect on their month ahead.

As one could imagine, the warnings come from the financial institutions because one has to be made of stern stuff to resist that money during those days it lays idle in the account and, if there is an oversight or the timing’s wrong, the transaction could leave the individual in all sorts of hot water, slipping into an unauthorised overdraft, which could end up costing even more and having a negative impact on their credit history, defeating the whole object of the exercise. Whichever way you look at it, repairing a credit history is a costly business and payday lenders know it.

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