How Does a Payday Loan Affect My Credit?

How does a payday loan affect my credit?You may be wondering if a payday loan will affect your credit, whether you pay it off or not. Most lenders don’t report your good payment history to the three major credit bureaus, although some do. If you don’t pay your loan off, most of the major payday lenders will not report you to a credit agencies unless you stay in default for a very long time.

This goes both ways, because they don’t check your credit before they approve you too, so although it won’t show up after you take out a loan, it also doesn’t prohibit you from getting a loan in the first place.

Will a Payday Loan Have a Negative Effect on My Credit?

Luckily, your credit score and history don’t factor into a payday loan transaction, which is why most people are not denied a payday loan based upon this data. On the down side, your credit report is not benefited by your timely payments of your loans in most cases.

There are some lenders that do offer this service, as a way of gaining your business over your competitors. However, it is also probably true that these same lenders will report you for nonpayment of your loan, thus bringing your score down further.

It’s best for all involved to just leave the whole credit thing out of this transaction. Most people that get a cash advance are doing so because they’ve been denied by a bank, or they know that if they apply they will be denied, so they just skip a step. If your credit was stellar you wouldn’t need to be resorting to a payday loan. The lenders know that, that’s why they happily keep that information out of their dealings, and only use them as a last resort when they’re left high and dry.

Not Paying Your Loan
If you’re worrying about a lender reporting you to the credit bureaus when you don’t pay, this should be the least of your worries. They typically only do this as a last resort, and you don’t want to go burning your bridges with the last lenders that will loan to you with no collateral, and only on your promise to pay them back. They’ll also bug the heck out of you if you don’t pay, calling you daily, or running the transaction through your bank, even when the funds aren’t in there.

Why Do They Need My Social Security Number Then?
Just because they won’t be reporting you to the credit agencies, doesn’t mean they won’t want your SSN for identification purposes. They have to cover all of their bases, and a Social Security number is really handy in tracking you down in case you decide you don’t want to pay.

Best Practices for Taking Out a Payday Loan
Your focus is slightly in the wrong place here. Rather than worrying about a payday loan affecting your credit at some unforeseen date in the future, you should be wondering if a payday loan is going to worsen your immediate and current situation. In 80% of the cases, payday loan customers are worse off after getting involves with cash advances than when they started. Payday loans wouldn’t be able to stay in business if they didn’t have repeat customers, so do your best to determine if you’re going to fall into this category.

Taking out a payday loan once has a higher success rate than taking out a second or third one. If you only take out one loan, you stand a good chance at it actually helping. Subsequent loans typically mean that you’re getting deeper into debt, and not saving yourself any fees, but actually digging a bigger hole that you’ll one day have to climb out of.

Even though it hurts, it might be a better idea to let things fall apart a bit. If you’re living beyond your means, or behind on several different things, it might make better sense to just take the late fees or put things off for a few weeks while you attend to specific bills. Using payday loans to juggle several different payments at the same time just adds another bill to your monthly expenditures, and there’s nothing beyond payday loans, they are the last stop to financial ruin.

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