Do Payday Loans Cause Poor Credit?

Because they don’t require a credit check, payday loans generally aren’t included on your credit report. So borrowing them and paying them back on time won’t boost your credit score. However, a payday loan can appear on your credit report if you fail to pay it back on time. In this case, the payday loan will hurt your credit score.

Payday lenders don’t immediately report an unpaid loan to the credit bureaus. However, after some time, they’ll send the delinquent loan to a collection agency who then places the loan on your credit report. That’s when a payday loan starts to affect your credit. Fortunately, if you make sure your checking account has enough money to repay the payday loan by the time it’s due, you won’t have to worry about whether a payday loan will affect your credit.

How payday loans work

When you’re in a financial bind and without savings or credit cards, you might take out a payday loan to help cover the emergency. The allure of payday loans is that they’re quick, relatively easy to obtain, and don’t require a credit check. So if you have poor credit, you can usually still qualify for a payday loan. To get a payday loan all you need is a recent pay stub and a valid checking account. You write a check for the amount of the loan plus the fee and within 7-21 days, the payday lender cashes the check as repayment for the loan. If you don’t have the money to back the loan when it’s due, you can pay an additional fee to extend it.