Payday loans are not reported to the big 3 credit bureaus. This is because there are no hard credit checks performed by payday lenders. Rather, lenders consider recent income history (and near term income) as the primary factor in approving a payday loan. It has proven to be the best indicator of a borrower’s ability to repay the loan.
As a result, there is no immediate impact on a borrower's credit score.
If you default on a payday loan, there is a possibility it could affect your credit score in the future. Most loan defaults are turned over to collection agencies. If they cannot collect or settle the debt, some of these agencies will go to civil court and request a judgment against the defaulted borrower. If they are able to get a judgment, then it could be reported to the credit bureaus and negatively impact your scores.
Generally, it does not help your credit score to take out a payday loan. Some lenders will report your successful repayment to the credit bureaus if you request them to do so, but they are not obligated to report it. Most lenders are not set up to report to credit bureaus like traditional banks, credit cards, or savings and loan lenders.
No, as noted above, payday lenders do not check your credit history. They verify your income and use alternate databases to determine if you will pay back your loan. Payday loans are short-term, small loans usually repaid in 1 month or less.
Since these loans are not reported, they are not on your credit reports. As mentioned previously, if you default on your loan and a judgment is given against you, then that judgment could appear on your credit reports and stay there if not satisfied for as long as 7 years.
They only affect your credit scores if you have a judgment for non-payment or if your lender agrees to report your on-time repayment of the loan.
This will occur only if a judgment is sought and approved by a court in your local jurisdiction and then reported to the credit bureaus.
If you satisfy a judgment before reporting to bureaus, it will not show on credit reports. Removing a judgment report is difficult, and you would need to work with each one separately and appeal to have it removed.
CashOne is a referral source, so we do not report any information about payday loans on credit reports. Most lenders also do not report unless there is a default. It is usually a collection agency that would report the default if they could not work out a settlement with the borrower.
Note: Many collection agencies do not bother seeking judgments but rather threaten to do so to try to get the borrower to settle the account. The reason is that getting a judgment costs time and money and often does not result in any payment for the debt.