Payday loans are a great option if your credit history has suffered as a result of financial hardship. You may be able to obtain a loan that you would otherwise have a very difficult time obtaining. There are a few ways that payday loans can affect your credit score and that your credit score can affect your payday loan.
Lenders May See Your Payday Loan History
Lenders may gain access to your payday loan history when considering you for a loan. However, whether you have acquired an actual payday loan vs. another type of loan will often not be shown on the credit history. If the loan is shown on your credit history and you pay it in time, this will help your credit score.
Any loans that you take out can be accessed by other lenders and can be used to decide whether to offer you a loan. However, some payday loan creditors will not report your loan to one of the three major creditors. Still, if you default on your debt, any creditor has the right to sell your debt and the purchaser of the debt can then report your debt to one of the three major credit reporting bureaus. This would likely lower your credit score.
Why Bad Credit Is Accepted
If you have had financial problems and are struggling to acquire a loan for an emergency, a payday loan is a good option. These loans do not usually require that you complete a background check. Lenders usually wish to rely on a credit report to determine if they will lend money to a consumer. However, for those who have a poor credit history, other methods are used, such as the writing of a check. You will write a check for the amount of the loan and this check will then be cashed at the date that your loan matures. You will simply need to make sure that you have enough money in your account to cover the balance until the check has been cashed. Otherwise, if your check bounces, you may be in violation of bad check laws.
Another approach is to require that you provide a recent pay stub. This is to verify that you are receiving a regular income and that you have the financial means to pay off the loan by the next paycheck. The size of the paycheck can also be used to determine how much the payday lender is willing to lend you.
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