People who apply for payday loans usually have had problems with their credit in the past which has left them with a poor credit score and the inability to qualify for other types of loans. They may have legitimate concerns that receiving a cash advance loan will harm their credit score even further, but this is not the case. If you are in this situation, you will be happy to know that a short-term loan does not affect your credit any differently than a more conventional loan does.
How a Payday Loan Can Positively Affect Your Credit
It may seem ironic that you can obtain this type of loan without a credit check, yet the lenders report the results of your payment history to the major credit bureaus. The good news is that if you repay your loan according to its terms, your credit report will reflect this and you may actually see your score increase. Since credit reports show payment history over the course of 30, 60 and 90 days and payday loans are intended for short-term purposes, your report will probably only show one payment. However, if that payment is on time, that will still bode well for you in the future.
Possible Negative Affects of Payday Loans on Your Credit Report
Some people may assume that just applying for this type of loan will mean getting a bad mark on your credit report, but there is no truth to this. Like all types of loans, payday cash advances are reported based on whether you paid according to the terms of the loan agreement. Another thing to keep in mind is if you apply for one short-term loan after another, this may be interpreted as a sign of having a debt ratio that is too high for your level of income and be reported as such on your credit report.
Is a Cash Advance Loan Right For You?
Now that you understand the possible credit implications of obtaining a cash advance loan, be sure to research a few different companies to see who offers the most favorable terms for your situation. In accordance with the federal Truth in Lending law, all types of lenders must not only truthfully state their rate of interest, but they must also show you a dollar amount indicating how much obtaining credit will have cost you by the time you have finished repaying the loan.
How to Apply
After you have decided on a lender for your short-term financial needs, the next step it to submit a brief loan application. Each lender will detail their specific requirements on their website, and you should be sure to read and understand them before you submit your application for review.
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