Payday Loans Can Only Hurt Your Credit Score

February 25, 2020 Cash Advance (Payday Loans)

MoneyTips

Bills are due, and you’re out of money. You’re considering a payday loan to plug the gap in your cash flow. You think you can use the payday loan responsibly and use it to build up your credit score. Think again.

Payday loans, along with almost all no-credit-check loans, do not report payment information to the credit reporting agencies. The only time payday loans show up in credit activity is when the loan goes into collections. A payday loan can’t help your credit score, but it can harm it once an unpaid debt is reported.

Before you seek a payday loan, understand what a payday loan is and how they stack up against alternatives. Payday loans target the poor credit market. Since there’s higher risk to lenders when the borrower‘s credit is poor or unknown, lenders charge higher interest rates.

Payday loans are short-term, small loans – generally for $500 or less and due within two weeks (the typical pay cycle). Because of the relatively small size of the…

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