We’ve all been behind on bills and felt like we needed some fast cash. In fact, every year more than 10 million Americans take out cash advance loans, often called payday loans online.
There’s nothing wrong with taking out a loan to pay bills or deal with an emergency. But if you’re trying to work on your credit score, you might want to consider other types of quick payment options. Cash advance loans won’t help your credit.
Let’s take a look at how payday loans or cash advance loans can hurt your credit score. Then you can decide if taking out this type of online loan is right for you.
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What is My Credit Score?
A credit score, also called your FICO score, showcases to lenders how healthy your financial habits are when you’re in debt. If you have a relatively low amount of credit card usage in relation to your income and pay your bills on time, your credit score will be higher than someone constantly in default or who shirks their financial responsibilities.
Credit scores are numbers between 300 and 850. Anything above a 700 credit score is pretty good, and above a 750 is excellent. You will qualify for elite deals and high reward credit cards if your score is above 800.
Paying Bills = Higher Credit Score
Paying your rent, utility bills, and other bills on time will increase your credit score. Any company you pay bills to or borrow from reports to several federal credit bureaus. Failure to pay means docking your score.
The length of your credit history will also impact your score. People who have never had a credit card or who don’t have a mortgage or car payment will have low credit scores due to a lack of history.
Keeping Your Score Up
There are lots of reasons why your credit score can fall, and it’s not always the best indicator of your financial health. But a higher credit score puts you in the running for lower mortgage interest rates, better quality credit cards, and higher borrowing limits.
It’s in your best interest to keep your score as high as you can get it. According to one of the largest credit reporting bureaus, Experian, the average American has a credit score of 704.
Cash Advance Loans and Your Credit Score
A cash advance loan, or payday loan no credit check, is what’s known as a bad credit loan. These are high-interest loans that people who have low FICO scores can get.
Online cash advance loans have become popular as the Internet has become more integrated into every aspect of daily life, which can make these quick-get loans seem simple. It’s necessary to read the fine print, whether seeking an online payday loan or one at a local lender.
Hurting Your Score
Cash advance loans can hurt your credit score due to how difficult it is to pay them back on time and with the proper interest rates. Payday loans are meant to be extremely short term cash advances, and that’s why they have such a high-interest rate — in some instances interest can be more than 300 percent!
When you fall behind on payments, your information gets sent to a credit reporting bureau. Your score can tank far, and quickly.
A Neutral Proposition
Even if you don’t fall behind on your cash advance loan repayment, taking out a payday loan will not help your credit score. These are $50 to $1,000 short term loans that are geared toward people with bad credit scores. They are not meant to be large loans that build financial trust in you over time, such as mortgages or car loans.
Payday loans are for true emergencies only!
How to Keep Your Score Up
If you take out cash advance loans, you will want to use safe and low-interest lenders that don’t resort to outlandish rates and scare tactics to get you to pay.
Choose a Reputable Lender
Life happens fast, and there are plenty of good reasons you might need to take out an online cash advance. Make sure to find the lender that communicates with you and is willing to accept payment for your personal loan no credit check on a schedule that works for you.
Don’t just pick the first lender you search for. Do your homework, and find one that offers repayment on a timeline you can abide.
And, when the time comes, pay your loan!
Keep Good Credit through On-Time Repayment
Keeping your credit score high after taking a payday loan is as simple as repaying the loan on its terms and not making late payments. Think of these loans as a stop-gap measure, not as a loan to help justify your lifestyle.
Using cash advance loans for continuous bill payments while not paying back the interest or the principle can be the kiss of death for your credit score. Your score can drop more than 50 points just weeks or months after you fail to pay back your payday loan.
Only work with lenders that will help personalize your terms, and always do a thorough financial check-up every six weeks to see if there’s anywhere you can save or cut back — especially if you have debts to pay.
If you’re having trouble living within your means, cut costs, see where you can scale back, and optimize the rewards you get from credit utilization.
Our Promise to You
At Bonsai Finance, we are committed to providing access to quick approval for online cash advance loans at highly competitive rates.
Our clients love us for being transparent with the fine print, including interest rates and personal loan terms. And we love to help people find the right financial solution for them — whether it’s an emergency or for long-term financial planning.
We approve some loans with no need for a credit check, which means there are no extraneous hard inquiries impacting your score. And we never penalize for early repayment.
Looking for a reputable online cash advance loan to get you by? We hope you’ll consider our services. Let us work with you to keep your credit score high and your bills paid off!