How Online Loans Impact Credit Scores in the Philippines


In today’s fast-paced world, where everyone is looking for instant gratification, online loans have become an increasingly popular option for those in need of quick cash. However, many people are unaware of the impact these loans can have on their credit scores. In this article, we will delve deeper into how online loans can affect credit scores in the Philippines and what you can do to protect yourself.

Understanding Credit Scores

Before we delve into how online loans can impact credit scores, it’s important to have a better understanding of credit scores. Credit scores are numerical representations of a person’s creditworthiness, based on their credit history. It is a three-digit number, ranging from 300 to 850, and a higher score indicates a better credit profile. In the Philippines, credit scores are determined by credit bureaus such as the Credit Information Corporation (CIC), which collects and maintains credit information on individuals and businesses.

A credit score is important because it determines your creditworthiness, and lenders use it to decide whether to lend you money or not. Having a good credit score can also help you get better interest rates on loans and credit cards.

How Online Loans Work

Online loans are short-term loans that are processed and approved quickly, often within a few hours. The application process is usually done online, and the funds are typically deposited directly into the borrower’s bank account. These loans are often unsecured, which means that they do not require collateral.

There are several types of online loans available in the Philippines, including personal loans, payday loans, and installment loans. Personal loans are typically larger loans that are paid back over a longer period, while payday loans are smaller loans that are paid back in a shorter period, often within two weeks. Installment loans are loans that are paid back in fixed monthly payments over a specified period.

The Impact of Online Loans on Credit Scores

When you apply for an online loan, the lender will typically perform a credit check to determine your creditworthiness. This credit check is known as a “hard inquiry,” and it can temporarily lower your credit score by a few points. However, if you make your payments on time, your credit score will gradually improve over time.

One thing to keep in mind is that if you miss a payment on your online loan, it can have a significant negative impact on your credit score. Late payments can stay on your credit report for up to seven years and can lower your credit score by several points.

Additionally, taking out too many loans at once can also have a negative impact on your credit score. This is because it can make it difficult to keep track of your payments, and missed payments can quickly add up. It is important to borrow responsibly and only take out loans that you can afford to repay.

Protecting Your Credit Score

If you’re considering taking out an online loan, there are several things you can do to protect your credit score. First, make sure you understand the terms of the loan, including the interest rate and repayment schedule. Second, make your payments on time and in full, as this will help improve your credit score over time. Third, be cautious about taking out too many loans at once, as this can make it difficult to keep track of your payments and can lead to missed payments.

Another way to protect your credit score is to regularly monitor your credit report. You can get a free credit report once a year from credit bureaus like CIC or through authorized credit reporting agencies. By reviewing your credit report regularly, you can spot any errors or inaccuracies and have them corrected promptly.


Online loans can be a convenient way to get quick cash, but they can also have a significant impact on your credit score if not managed responsibly. It’s important to understand how online loans work and how they can affect your credit score before taking out a loan.

By understanding the terms of the loan, making payments on time, and avoiding taking out too many loans at once, you can protect your credit score and avoid negative consequences like missed payments and lower credit scores.

It’s also important to regularly monitor your credit report to ensure that it is accurate and up to date. This can help you identify any errors or inaccuracies that may be affecting your credit score and have them corrected promptly.

In summary, online loans can be a useful tool for getting quick cash, but it’s important to use them responsibly and understand how they can impact your credit score. By doing so, you can protect your creditworthiness and ensure that you are able to access credit when you need it in the future.

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CashLoanPH Changed status to publish 13/03/2023
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