payday loan affect credit score

Does a Payday Loan Affect My Credit Rating?

Bank loans, mortgages, student loans, and credit cards can affect your credit rating. However, they don't all make the same impact on your score. For instance, longer-term loans carry little weight, while credit cards have a bigger effect. 

This article explores how credit scores are calculated and whether a loan will be detrimental to your overall credit rating. 

How Bureaus Calculate Your Credit Scores

Before considering whether a payday loan impacts your credit, it's worth understanding how the major credit agencies (i.e., TransUnion, Equifax, and Experian) calculate your score.��

While nobody knows the specific algorithm, we know they use a mixture of the following information:

  • The number of open credit lines
  • The value of your open credit lines
  • The age of your open credit lines
  • Your on-time payment history
  • The balance of funds taken from each open credit line
  • The utilization rate of your available credit
  • Your income
  • The number of credit checks

It would be unimaginably helpful if each of the above carried the same weight. But sadly, that isn't the case. 

Typically, your utilization ratio and payment history have the biggest impact on your credit score. Thus, limiting your credit usage to under 30% of your allocated amount and making your payments on time (or early) gives you the best chance of an excellent credit score. 

Conversely, using nearly all of your credit causes a rating decrease. Plus, letting your outstanding balances stay sky-high for long periods can negatively impact your score.

Will A Payday Loan Affect Your Credit Rating?

As we mentioned earlier, a bank loan, credit card, student loan, and mortgage can impact your rating. However, a payday loan does not.

When you apply for a loan or line of credit with a bank, the bank contacts one of the three major credit reporting bureaus to determine your credit score and analyze your report.

Whichever bureau they talk to uses the criteria discussed earlier and puts them into their algorithm to calculate your score. They report this number to your bank. 

The bank takes the figure and state of your credit report to determine whether your credit situation is "worthy" for the loan or line of credit you want.

woman thinking with text that says does a payday loan affect my credit score

So, Does A Payday Loan Affect It?

In short, payday loans will not show up on your credit report from TransUnion, Equifax, or Experian. Why? Because payday lenders like us don't report them to the credit bureaus.

This is one of the primary determining factors that lead people to choosing payday advances over traditional loans. With a payday advance, anyone from any financial background, whether they have good, bad, or nonexistent credit can apply. Everyone is considered regardless of their financial history or credit score. You'll be approved on a case-by-case basis by our loan representatives based on the information you submit and your ability to repay the loan. 

If you fail to repay the loan, it may be sent to collections. However, this does not mean it's reported to the credit bureaus. 

You Can Use Payday Loans Without Harming Your Credit Rating

The easiest way to prevent a loan from damaging your credit score is only to take one out when:

  • You have no other way to get money to fund your emergency.
  • You are 100% certain you can repay it within the specified timeframe.

That way, you can pay for your crisis and prevent any long-term credit or financial impact! Payday loans are a great solution for this situation, as you can get the money you need within 24 hours and do not have to worry about your credit score being affected whatsoever. 

How To Get A Payday Loan

You're more than aware of how traditional loans affect your credit score. Payday loans do not. Therefore, you can make a well-informed guess as to whether it's the right option for you.

If it is, follow our straightforward process below to get the payday advance you need:

  1. Start proceedings by completing our online form. It should only take you five minutes as we just ask for simple information.
  2. Answer the phone when we give you a call to talk about the process, detail the required items, and clear any concerns.
  3. Head to your nearest Fast Payday Loans, Inc. store with your ID, most recent pay stub, and a blank check.
  4. Wait while we assess your information and verify your identity to confirm you qualify for one of our payday loans.
  5. If you're happy with the amount we offer, sign the paperwork. Our loan associate will guide you through it.
  6. Lastly, we deposit the money you need into your bank account on the same or next bank working day.

Get A Payday Loan From Us Today!

We’ve detailed the ways loans may affect your credit score. Complete our easy online form to get a payday loan that won't damage your credit score right now. Our team is waiting to help you through the process.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.

Emma Frost

Emma Frost is a lifestyle and finance blogger with a talent for communication and a passion for financial literacy. She uses her writing talents to explore topics that help her readers gain financial stability and growth.