Payday loans are an excellent way to solve money issues! But do they impact your credit score?
If you’ve been thinking about payday loans, you might be curious about them. How will they appear on your credit report? How can they react to your credit score? How much are your chances of approving money in the future?
Getting a payday loan won’t instantly change your credit score. But, just like with any credit, how you handle the money you borrowed matters. If you handle it responsibly, it could help your credit score go up. On the other hand, if you handle it well, your credit score could stay high.
What are payday loans?
Payday loans, often called cash advances, are quick loans that can help you get money fast for emergencies. They’re usually for small amounts; you’re expected to pay them back when you get your next paycheck.
Payday loans are an option for people with different credit scores – good, okay, or not. They’re a choice for individuals who need money right away. But remember, it’s wise to use payday loans carefully. Only borrow when needed so you don’t get stuck in a debt cycle. You can advance cash as much as $1,500, and you’ll have up to 62 days to return it.
Payday loans are not like regular loans because:
- You can only get them for a short time, usually just a few weeks.
- You might be eligible without them checking your credit.
- If you pay on time, you’ll pay a set fee instead of interest.
- The lender sets up your loan payments to match when you get paid.
What are payday loans used for?
Payday loans are made to make borrowing money simple, but they should only be used when you have no choice because they usually have high interest rates.
Here are some situations where an unsecured loan from Payday Advance could be helpful:
- Needing to fix your car right away?
- Putting down a deposit and covering fees for renting a place.
- Suddenly, they have to pay significant unexpected expenses.
- Having to pay for medical or dental emergencies.
- Needing to buy event or concert tickets quickly before they are unavailable.
- Needing to fix something at home like plumbing or electrical issues quickly.
- Having to fix or buy essential home appliances like a fridge or washing machine on short notice.
Do payday loans show on your credit report?
Quick answer: No. Usually, if you repay a payday loan on time, big credit agencies (like TransUnion, Experian, and Equifax) won’t see it on your credit report. It means paying back a payday loan on time will keep your credit the same. So, though the loan won’t make your score go down, it also won’t make it go up because you’re making on-time payments.
Sadly, if you don’t fund back a payday loan, it might be handled by collection agencies. Your credit can be damaged in these situations:
- Collections:If you don’t repay what you owe, the payday lender might give it to a debt collection agency. These agencies usually tell credit bureaus about the loan. When this happens, the collection info appears on your report and can hurt your credit score.
- Lawsuits:If the lender takes legal action against you to get the money back and you lose the lawsuit, it also appears on your credit record, and your score goes down.
- Late repayments:When your lender tells the credit agencies about your payments if you’re late, it is recorded on your credit report and a cause of rating drop.
How long does a payday loan stay on your credit report?
Credit agencies can collect both good and bad details about your credit history. It covers info about payments you made on schedule and those you missed. They hold onto this data on your credit report for a specific time.
The specific duration depends on the following changes:
- The kind of money-related details
- Where you live, like your province or territory
- The credit agency that made the report
Negative stuff related to payday loans can be things like not paying on time or letting payday accounts go to collection agencies. Depending on the laws in your province, credit agencies might store this bad info on your credit report for a set amount of time.
Usually, it stays there for about six years.
But in a few places like Newfoundland and Labrador, Ontario, and Quebec, TransUnion keeps this info for seven years.
Can I get a payday loan with bad credit?
Yes, you can get! Many people who apply for payday loans have a low credit score. A credit score under 650 is usually considered low, but that should allow you to try.
Bad credit payday loans are meant for people with a not-so-great credit history. These loans are usually for a short to medium amount of time and are designed to help when money problems suddenly pop up. They’re a fast and easy way to get money for people turned down by regular lenders.
Lenders who work with Whizz focus on whether you can repay the loan now, not just what happened in the past.
How to improve credit score in 30 days?
You might believe that improving your credit score would need many months or even years, and that could be true for some individuals. Especially, if you’ve had some serious financial blunders in the past. But there are steps you can take that might make your credit score better in just 30 days.
Double-check that your credit report is accurate.
Checking your credit report for accuracy is supreme. Review it carefully for outdated debts, unfamiliar info, or mistakes. If you find any errors, ask all major credit bureaus to correct them. Checking twice a year is a good idea.
Make sure to pay bills on time.
Paying your bills on schedule is crucial for your credit. On-time payments can perk up your score (30-35% influenced by your payment history), while consistently punctual can improve it.
Lower the balance on a credit card or loan.
To boost your credit score, consider paying off the credit card almost at its limit. Lowering your credit usage can raise your score, and the card issuer might even increase your credit limit, leading to the next tip.
Raise the credit limit on your existing cards.
If you’ve been paying on time for about six months, ask your current payday lenders to increase your credit limit. While this might lead to a slight dip in your score due to a hard inquiry, the benefits of a higher limit could be more significant. If they agree, your credit utilization rate could decrease, potentially improving your credit score.
Consider making payments two times a month.
If you have a set monthly spending, try making two payments instead of one to clear it. It can keep your credit usage low and potentially lift your credit rating.
Consolidate your debt
If you’ve got multiple credit cards with high-interest rates, think about getting a new card with a balance transfer offer to combine your debt. It could enhance your credit score by giving you more available credit.
Conclusion
Always ensure to consider all the available options before applying for payday loans. You might check installment loans if you want a loan at low interest and with a longer repayment time. Get financial advice from independent financial advisors if you’re not sure.
No matter what you think about payday loans now, if you want these short-term personal loans through trusted and licensed Canadian lenders, consider guaranteed payday loans through Whizz. We will help you out when you need it most.
David secures his degree in Communication from Loyola University, Chicago. He loves to discuss through his passion of professional on fashion, finance and TV. He is a coffee lover.
📧: david.argy@whizzpaydayloans.ca
