Contrary to popular belief, most payday advance do get reported to the major credit reporting agencies in some fashion. Since they don’t require credit checks for approval, many borrowers assume that they have no effect on your credit score. This is not true, especially if you default on the loan. Even though applying for the payday loan itself generally has no effect on your credit, the end result of the loan certainly can. If you pay the loan off on time, you could actually see a minimal gain in your score. However, if you don’t, it can have a seriously negative impact on your score.

When you default on payday advance, your lender will likely report them to the credit bureaus. Needless to say, this will have a seriously negative impact on your credit rating, and could easily affect your ability to rent a house, buy a car, and even get a job. In addition to the negative report for the loan, often times payday lenders will send delinquent borrowers to collections. If this happens, you will end up with two negative marks on your credit report. There will be one negative report for the loan itself, and one for the collection agency.

The bottom line is that there is a minimal upside to your credit rating for taking a payday loan and paying it off on time.

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