Customers are judged too harshly when taking out payday loans, Russell Hamblin-Boone, chief executive of the Consumer Finance Association, argued.
He examined how some assert that paying short-term loans can build a positive credit history, while others assert that it could stop customers securing a mortgage.
Although borrowing money and paying it back in full and on time normally improves your credit history, with payday or short-term loans this can be seen as a sign of financial hardship or mismanagement.
Two thirds of mortgage brokers said they had a customer turned down after taking a payday loan, a recent online snapshot poll revealed.
Hamblin-Boone said: “Unfortunately, when it comes to short-term loans, it seems that some finance companies and mortgage brokers are judging customers on the type of loan they have taken rather than their ability to repay.
“None of us can predict the future, so it seems unfair to black mark a person’s credit score based on a period when money was tight and they were managing with short-term loans.
“It’s a tough time economically for most people and anyone could find themselves needing a little extra cash at the end of the month. So why make matters worse by penalizing them for taking measures to help themselves, especially if they pay back their loan on the agreed date?”
Sometimes people can suffer a temporary blip, as over the course of four years more than half of working age people find themselves living on a low to middle income for at least one year, think tank Resolution Foundation discovered.
James Jones at Experian, said: “Each lender will assess your credit history using its own criteria and while some may see a successfully settled and well-managed payday loan as positive, others may disagree.
“Importantly, each lender’s own creditworthiness assessments will be based on how its past customers who had used short-term credit when they made their applications then went on to behave – that’s how credit scoring works.