WHAT YOU NEED TO KNOW ABOUT PAYDAY LOANS AND CREDIT REPORT
One of the most common concerns that people have when they are considering obtaining a short term loan is how it will impact their credit report. Mainly, your credit report contains positive and negative information on your financial history, which then is used to determine your eligibility for mostly any financial product.
When you get a loan from a traditional lender or institution (such as banks or retail stores), this information is given to the main Credit Reporting Agencies in Canada such as Equifax and TransUnion. Lenders provide these agencies with an update of your how you are currently paying your bills to understand your financial reliability. By having this credit information, lenders can assess your creditworthiness and make an informed lending decision.
Since most loans, credit cards and lines of credits appear on your credit report, it is normal that you are wondering what the implications on your credit report for getting a payday loan are. The good news for the consumer is that payday loans are not reported to credit bureaus, so they don’t show up on your credit report.
However, payday lenders may pull your report to have a better understanding of your current financial situation and help them decide about your application. This credit-related inquiry should be disclosed when applying for a loan.
Even though payday loans are not reported, failing to repay your loan may result in your loan been sent to a collection agency and then reported negatively to the major credit bureaus. Also, this information may be considered by lenders when you apply for a loan with them in the future.
Payday Loans with Bad Credit or No Credit History
Obtaining a payday loan with bad credit or no credit history is much easier than other kinds of loans or credit products. Payday lenders do not have the same strict requirements that traditional financial institutions do. Unlike banks, direct lenders typically do not rely as heavily on credit scores to determine risk.
People with bad credit who have been rejected by banks and traditional lenders can still get instant loans, especially with private money lenders. Credit scores do not have to be an impediment to obtaining an unsecured loan. A simple number should not determine whether you can access money when you need it the most. Direct lenders recognize this and have taken great efforts to make personal lending as accessible as possible.
Unlike banks, payday loan companies consider other aspects of your application to determine your eligibility for a loan. They utilize technology to analyse several data points to evaluate to make a lending risk decision. For instance, they will focus on your financial stability and income to make an approval decision.
The main consideration is not what your credit score may be, but rather if you can repay the loan amount in full and on time. Therefore, your odds of approval for a cash loan are good, regardless of poor credit history.
While a credit check is performed to verify your identity and other information provided on your online application, the top online lenders – including iCASH – do not reject applicants based on credit scores alone. You can obtain a bad credit loan of up to $1,500 when applying with us.
FAQs: Payday Loans and Credit Reports
Do payday loan lenders use my credit score?
Payday Lenders do not use only your credit report to determine your eligibility and approval for a loan. While some lenders may require having a minimum credit score in order to qualify for a payday loan, other best lenders like iCASH don’t.
Unlike, banks and traditional financial institutions who based their approval decision on your credit score, money lenders do not depend on it when deciding.
You can still qualify for a quick cash loan regardless of your credit history.
Do payday loans check your credit?
In general, most payday lenders perform a check of your credit history and score as part of their approval process.
Lenders typically inform you during the application that they will perform a credit check. Depending on the province you live in, payday lenders may notify in written or oral form. In Nova Scotia, Prince Edward Island and Saskatchewan, lenders only need to tell you that they will check your report, while in the rest of the provinces they will require your written consent.
Credit checks are performed to verify the information provided in your application to prevent fraud and identity theft. Your credit report may include personal and financial information about you. For instance, it may contain your name, date of birth, current address, as well as if you have been declared in bankruptcy or have a court decision against you related to credit.
To learn more about how to access your credit score for free, you can consult the website of the Financial Consumer Agency of Canada.
How do payday loans affect credit?
Payday loans don’t affect your credit score or credit history unless you fail to repay them on time. Because payday loans are issued for a short period of time, they don’t get reported to the major credit bureaus the same way a car or home loans are.
This also means that obtaining and repaying your loan won’t usually improve your credit score. However, it won’t negatively affect your score by increasing your outstanding debt neither.
Payment is usually handled by pre-authorized debit. If your private lender receives insufficient funds notice at the time of debiting, it will pass the NSF fee along to you and may contact you immediately. If you still haven’t repaid your cash loan, it will likely be sent to a collection agency or debt collector.
When a same day short term loan, credit account or bill is sent to a collection agency, it is reported to the major credit bureaus, which may negatively impact your credit report. The best way to avoid any negative effects from a loan on your credit is to ensure you pay it back on time, in full, as agreed.
Do you need good credit for a payday loan?
No. You don’t strictly need to have good credit to be approved for a payday loan. Even though having a good score improves your odds of approval, obtaining a payday loan with bad credit is much easier than with other types of credit.
While emergency loans usually have less strict credit score requirements than most other kinds of loans or credit products. Many private online lenders who offer instant loans online have very low or no requirements in order to qualify.
At the end of the day, good credit is not needed for a same day loan.
Do payday loans show up on credit reports?
If you apply for a payday loan with a private lender it won’t show up in your credit report. Payday loans aren’t reported to the credit bureaus in most cases. Even if they are, they don’t typically appear on your main credit report or affect your credit score. Rather, they may be logged and cataloged in special reports that are offered by the credit bureaus. While most people are familiar with their main score and report, there is a wide range of reports that credit bureaus produce for various market sectors and clients.
If you don’t repay your same day loan on time, it will be turned over to a debt collector or collection agency, who will report your loan debt to the credit bureaus. As long as you repay your loan on time, you don’t need to worry about your loan to be reported.
Does repaying a payday loan help your credit?
Since, payday lenders don’t report your payment history to credit bureaus and don’t appear on your credit report, paying off your loan doesn’t boost your credit score either. On the other hand, repaying long term loans such as car or home loans may help demonstrate your financial responsibility which will help boost your credit.
Paying off your small personal loan on time, like any other type of credit, is important. Even though they don’t help you build your credit directly, they can help you solve cash emergencies that make affect your credit in the future.