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Do Payday Loans Affect Your Credit
20 Feb 2019

Do Payday Loans Affect Your Credit? A Guide for Borrowers

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Your credit score can make or break your life.

Well, maybe it’s not quite that dramatic, but it does heavily impact your finances. Do you want to finance a new car? They’ll check your report. Wanna buy a house? That score will play a big part in determining what kind of loan you can qualify for.

Thus, you want to keep your score up as high as possible. If you’re one of the 1 in 3 Americans whose credit score is already less than desirable, you definitely don’t want to do anything to make it fall any farther.

To that end, you may be asking yourself “do payday loans affect your credit?” You need a bit of extra cash, but you don’t want to bring your score down.

Read on to find out if you can take out a payday loan without fear.

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What Are Payday Loans?

Payday loans are a handy way to get some quick cash for an emergency. Say your car breaks down and you need a few hundred dollars to fix it. You’re in a catch 22 because you need your car to get to work and you need to work to make the money.

A payday loan is your answer.

The application process is quick and easy and you’ll have your cash fast. In fact, if you have a good mechanic you’ll be back in the office Monday morning like nothing happened.

Credit Reporting

For most types of loans, (credit cards, mortgages, etc.) the lender will report your payments to the big three credit reporting agencies. At 35% of your score, your payment history is the biggest factor that affects your credit.

The good news is that payday lenders, in general, don’t report your payment history. Thus, if you make a late payment here and there, it won’t bring your score down.

The bad news is that they don’t report your payment history. On-time payments will help bring your score up. So if you’re trying to rebuild your credit, payday loans aren’t the way to do it.

However, a big consideration to keep in mind is that if you default on the loan and it goes to collections, the debt collector will probably report it. This is the most significant way a payday loan can affect your credit and, obviously, you’ll want to avoid it.

If you find that you’re having trouble making payments, contact the lender as soon as possible. They may be willing to work with you and create a more manageable payment schedule. Remember, more time equals more interest so talk to them sooner rather than later!

So, Do Payday Loans Affect Your Credit?

We hope this article has answered your question, “do payday loans affect your credit?”

The short answer is no, they usually don’t. Payday loans have neither a positive or negative effect on your score. Unless, of course, you don’t pay the loan as you should. Then you can bet that unpaid loan will come back to bite you.

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