Do Quick Cash Loans Help Build Credit?August 25, 2020
You may not need to complete a credit check to get a payday loan, but that doesn’t mean this type of borrowing can’t impact your credit score. Find out how payday loans can affect your credit report and why you should steer clear of them if you want to build credit.
Table of Contents Contents
Payday loans don’t work like traditional loans. You can’t get them from a bank and you normally don’t need to do a credit check to get approved. As a result, some people believe payday loans can’t affect their credit score – this is simply not true. While payday loans are unable to lift your credit rating, they can do severe damage to it if you fail to repay the lender.
Can payday loans improve your credit score?
Even if you make all your payments on time, payday loans can’t boost your credit score because payday lenders don’t report your payment history to credit bureaus. Luckily, there is a way to get a loan and build credit without having to resort to this risky and expensive form of borrowing (more on that later).
Can payday loans hurt your credit score?
They sure can. Payday lenders won’t help you improve your credit score, but they will look for opportunities to negatively affect it. If you fail to repay a payday loan, the lender may work with a debt collection agency. These agencies report information to credit bureaus which can cause your payday loan to show up on your credit report. Accounts sent to collection agencies can severely impact your credit rating and stay on your credit report for six years.
What else can happen if you don’t repay a payday loan?
It’s not just your credit score you need to worry about. Other serious consequences can arise if you can’t pay back your loan by the due date. Late fees, additional interest charges, and other hidden costs can cause your debt to snowball, making it easy for you to fall into a debt trap.
Depending on the province you live in, payday lenders can also:
- try to contact you by calling your family, friends, and employer
- sue you for the debt
- seize your home
- take you to court and gain the right to garnish your wages
Do payday loan applications show up on a credit report?
Payday loan applications typically don’t appear on credit reports because most lenders don’t conduct credit checks. If you have bad credit, it may be tempting to get a payday loan with no credit check, however you may want to think twice before applying. With no information about your financial situation, lenders may make the mistake of approving loans larger than what you can afford. This can increase your chances of defaulting on the loan and therefore hurting your credit score.
What’s the best option if you want to get a loan AND build credit?
A personal installment loan is a superior option when you want to build credit. This type of loan differs to a payday loan because you agree to pay back the lump sum in equal payments—usually monthly—over a fixed term. As you make your payments on time and in full every month, this positive payment history is reported to the credit bureaus creating which boosts your credit score tremendously.
Payments will include interest charges too, but reputable lenders will offer open-ended loans meaning you can pay the loan off at any time to avoid having to pay more interest. Installment loan agreements stipulate an end date so you know right from the get-go when the loan will be fully repaid.
Regardless of what your credit situation currently is, Spring Financial is a reputable online lender that delivers a simple, stress-free borrowing experience no matter which province or territory you live in:
- All credit scores approved: Access personal installment loans ($500 to $35,000) or our signature credit builder program whether you have poor credit, minimal credit, or no credit at all.
- Quick application process: It takes just a few minutes to apply online. You can also speak to a live representative by phone or text message if you prefer.
- Customizable repayment schedules: Flexible payment terms allow you to choose a plan that’s right for you.
- Full transparency: No application fees, maintenance charges, and other hidden costs.
- Safe and secure: State-of-the-art security technology keeps your data protected.
- Credible online lender: View more than 1,500 reviews on Trustpilot.
Get approved for your personal loan today by clicking here and applying online, or calling 1-888-556-6441.