Do Payday Loans Affect My Credit Score?


Oftentimes in life, the need arises to borrow quick cash, which is what makes the payday loan so appealing to many borrowers. Payday loans are the fastest type of loan to receive, and borrowers with all types of credit histories can obtain them because there is no credit check required to receive this type of loan. A payday loan can also be known as a cash advance or guaranteed loan. Because of the lenient requirements to receive funding in this manner, even those borrowers who have been through bankruptcy, divorce, repossession, and garnishment can be approved as easily as those with outstanding credit histories and great performance with past debts.

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Applying For A Payday Loan

To apply for a cash advance loan, you will visit the website that has been established by the lender. There you will fill out an online application where you will be asked questions about your income that will be used to determine the amount of money that you can qualify to borrow. You will also be required to provide the lender with your checking account information, including ABA bank routing number so that your money can be deposited into your account. The term of the payday loan usually runs for around two weeks to one month. When the loan is due, the lender will make an electronic debit from your checking account to recover the money that is owed to them. As long as you have steady income from employment, retirement, or other benefits and a checking account, you can receive a cash advance loan.

How A Payday Loan Can Affect Your Credit Score

Although a payday loan is not granted based on your credit history, it can be very useful in improving your credit ranking. Many lenders (although not all lenders) report your payment of this loan to the major credit reporting bureaus. That means that even though a credit check is not needed to receive a cash advance loan, your prompt repayment can be noted on your credit record, effectively improving your credit score and credit ranking.

Inversely, if you are not a good steward of your payday loan and fail to repay the lender on time or make arrangements to do so, a negative report against you can be issued that will lower your credit score. Be sure that you are confident in your own ability to repay the lender prior to taking out a payday loan as the payment or payments are due rather quickly. Also, be aware that taking out any type of loan affects your debt to income ratio and therefore your credit ranking. Use the payday loan only when you have exhausted your ability to borrow money using a personal loan.

Why Choose An Online Lender?

The most expedient means of getting a cash advance loan is to go through an online lender. While there are brick and mortar establishments and lending institutions that offer the payday loan or cash advance loan, they often take more time than online lenders to process your application and provide you with the money that you need, and may have lower borrowing limits that will not adequately meet the emergency or urgent need that you have. Online lenders also offer an almost immediate deposit of your funds directly into your bank account so that you can have access to the money from your cash advance loan even faster.


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