Do Payday Loans Build Credit?
Do payday loans build credit? This question may come to your mind if you’re considering making a payday loan request. Taking advantage of a payday loan to build your credit profile may sound like a good idea. But does it happen that way?
Read on to find out.
Can Payday Loans Help Your Credit?
The short answer is no. Here are a few reasons payday loans cannot improve bad credit scores.
Borrowers can sometimes obtain payday loans without being subjected to a hard credit check through the big three credit bureaus, but most lenders will pull some sort of credit check. In instances where no hard credit check occurs, there may be no effect on your credit score when you request for a payday loan.
For the reasons discussed above, you cannot take advantage of payday loans to improve bad credit, unlike other personal loans.
Can Payday Loans Harm Your Credit?
However, payday loans can potentially harm your credit score.
If you fail to pay on time, the lender can contact a debt-collection agency to recover what you owe.
When contacted, the debt-collection agency will purchase your account from the payday lender.
Once the agency has made the purchase, it can report the account to credit-rating agencies. If that happens, your credit score may suffer.
So, the bottom line is that you cannot use payday loans to your advantage for improving your credit score.
This is the simple answer to your question, “can payday loans help your credit.”
On the other hand, if you default on repayments, then it might prove detrimental to your credit score.
Therefore, it’s better to find other means of improving your credit score.
Do You Need to Provide Your Credit Score to Obtain a Payday Loan?
Payday loans are meant to be a hassle-free alternative to other kinds of credit including personal loans.
For this reason, payday lenders may choose to forego a formal credit check.
As explained above, this is a reason why you cannot use payday loan repayments to improve your credit score and report.
However, payday loans can be advantageous due to this very factor.
Since you do not always need to provide your credit score to certain payday lenders, you may be able to get a loan even if your credit score is very poor.
Of course, some payday lenders require your credit score. You can still gain important benefits from such lenders.
Why Should You Approach Payday Lenders?
Even if your loan request elsewhere was rejected due to a poor credit score, there is still a chance that your loan may be approved by these payday lenders.
Such payday lenders may approve low credit scores that are not acceptable anywhere else.
In such cases, a lower credit score means that you may be extended less than the full payday amount. You may also have to pay a higher interest rate.
You may also have to show proof of income and your ID card, among other documents.
If your income and credit score qualifies, you will be extended a loan amount rapidly.
It makes much more sense to approach payday lenders even if they require your credit score since this can incur benefits.
Minimal Documents Required
The documentation requirement is minimal. You just need to show proof of income, a credit report copy, a blank check from a bank account in your name, and your ID card.
This is far less than what’s required by other financial institutions. Hence, the approval process is less stressful, hassle-free, and quick.
Since very few documents are required, the approval process is rapid. You will then obtain your much-needed cash advance quickly to pay off your financial emergency.
Better Chances of Approval
Your chances of approval are much better with payday lenders than major financial institutions. Payday lenders are often willing to extend loans to borrowers with credit scores that may not be acceptable to major financial institutions.
So, if your credit score is so low that no one is willing to extend a loan to you, then you should consider payday lenders as an alternative.
The good news is that some of these lenders are available online. You will not need to leave your home or stand in exasperatingly-long lines.
If you need quick cash to pay for an emergency, then GetCash.com may be the answer to your needs.
GetCash.com does not extend loans itself. Instead, it can directly connect you to one of the many lenders in its network.