How Payday Loans Affect Your Credit Score?

Posted by elainjohnsonz on April 6th, 2020

                      

If you’ve already applied for Consolidating payday loan debt, you probably know that it takes only a bank account, an income source, and any government identification to be qualified for it. Payday lenders don’t check your credit history to approve your loan. Does it affect your credit score anyway? Well, that’s a difficult question to answer, as it completely depends on how you manage to pay off the loan.

Despite the fact that payday loans don’t affect your credit score directly, in many cases borrowers end up affecting their credit in harmful ways. It is because they probably got trapped into the unmanageable cycle of loan, not because they applied for it.

One of several reasons that payday loans affect your credit card is bounced checks. Suppose you gave your lender a check to collect cash from your account on the due date. If the balance with additional and necessary fees and charges is not available in your account, then the check will be declared bounced.

A bounced check doesn’t affect your credit score, but if you don’t repay it shortly, then the bank will consider collection agencies to collect cash from you. And, if the agency reports this issue to the credit bureau, this will certainly affect your credit score.

Another thing that can have a negative impact on your credit score is that if you apply for multiple payday loans in a short period of time and get rejected. Or, if you apply for a larger amount of loan while having several other credit accounts open, it could also harm your credit score.

There’s a chance that your lender or collection agency sue you in order to collect unpaid loans. In this case, if you fail to appear in court on time or if you lose the case, this can show up on your credit report and your credit score can be negatively affected up for 7 years. If you’re already caught up deep, then it’s better if you hire another lender who can Consolidate payday loan debt.

80% of the payday loans are either renewed or rolled over. So it can be said that if you really don’t like loosing up your credit score, you should stay away from payday loans.