Does Applying for a Payday Loan Affect Your Credit Score?

People usually wonder what are the most important factors that affect our credit scores and how to build their credit score to get benefits from it. As a matter of fact, this is one of the most Googled questions, for a good reason. Your credit score is actually important because it shows how likely it is for you to pay back your debt. This is a very important indicator for almost any institution out there, especially if you’re trying to get a new loan of any kind, buy a house, a car, etc.

As you already know it is possible and doable to improve your credit score over time. Having this in mind, you need to know there are at least five factors that affect your credit score and that you need to pay attention to.

First of all, there is your payment history. Financial experts claim that this is the most important factor of them all because if you miss your payments, this will backfire in giving you a bad score: which can then have a negative impact on your finances and lower your credit score over time. If this is bad, you will most certainly not get a new loan.

Banks also take into consideration everything you already own to someone, and they look at the ratio between the limits and the used credit. Again, with the same goal, which is checking your reliability.


There are also other factors such as credit history, length mix, and the number of accounts you have recently opened, which includes all the loans you’ve recently taken.

But, if you don’t have enough time to build your credit score, and you need cash fast, what is there to be done? People are usually discouraged by the fact that they have already taken several loans.

When you’re bankrupt and need quick funding, a payday loan may seem viable, and that’s one of the few options you can take advantage of. Nevertheless, even with their seeming advantages, these loans can be costly, which makes people think and wonder if it’s the right thing to do.

Here’s why: a payday loan might harm your creditworthiness, making it difficult to acquire funds from a traditional lender.

What Is a Payday Loan?

But first of all, it is important to discuss what a payday loan actually is, what are the conditions and how to weigh all the pros and cons of it.

Simply put, it is a short-term loan aimed to assist customers in dealing with unexpected needs. Applicants can choose from $50 to $1,000, depending on their needs.

Payday loans are straightforward to obtain, but their interest rates are typically substantially higher than other types of borrowing; they usually have an APR of 1,500%.

This type of loan is typically repaid during the next paycheck, although a few lenders may give you extra leeway. Because the repayment is frequently made via debit card, it’s critical to have sufficient cash on hand as fees for missing your payment could rapidly add up.

Does Payday Loan Application Affect Your Credit Score?


This is a very important question to take into consideration. The answer is both yes and no. A payday loan won’t harm your credit score. However, if a firm view the loans adversely affects your credit profile. If you have a payday loan on your record, your credit profile could be affected. Each loan might lower your score.

Keep in mind that you have more than one credit score—credit reporting bureaus, lenders, and other firms will use their techniques to determine your score. A payday loan may impact your credit score depending on the organization. Creditors understand that consumers taking out short-term loans aren’t always in desperate financial situations. Some of them treat payday loans just like any other type of loan.

Can a Payday Loan Show Up on Your Credit Report?

Like any financing, payday loans will show up on your credit report. And since you lent from a payday, other lenders may scrutinize your potential opportunities more closely. If your credit report reveals that you’ve borrowed payday loans frequently, financial institutions may see you adversely, limiting the services they’re prepared to provide.

How Long Will Payday Loan Appear on Your Credit Report?

Depending on your credit reporting institution, mortgage loans, payday loans, or credit cards will be on your credit record for one to two years.

Lenders will do a credit check on your profile if you request a loan. After that, they review your information with many credit reporting bureaus, each with its rating algorithm. However, the information they collect is comparable, and your loan may be on your credit file for six years once you’ve repaid the loan.

Can You Acquire a Payday Loan With a Bad Credit History?


Payday loans are often meant to satisfy the demands of applicants who have a bad credit background. This implies that you can be eligible to be funded by a payday lender regardless of your bad credit score. Many online brokers, such as, offer payday loans for bad credit direct lenders with guaranteed approval.

However, you must understand all money lenders are unique and will evaluate applicants on their own merits. In other words, there’s no assurance that yours will be approved. Still, this is a good option if you need money but you don’t meet traditional requirements when it comes to your credit score and other conditions for getting a new loan. This means that the best thing you can do is actually apply since chances are high that you’ll get approved. If you don’t, it’s still better to apply and know where you stand.


Payday loans are a convenient source of finance for persons turned down by regular creditors due to low earnings or previous bad loans. This loan might provide you with immediate cash to cover an unexpected need. But, if you can’t afford the loan’s hefty interest rates, you may find yourself in a debt trap. If you, however, have a good understanding of what this loan is, and a plan on how to pay the interest rates, then this is a great option for getting cash instantly.

Still, if you’re not in desperate need, and you can afford a bit of patience and build your credit score, you should avoid taking out a costly payday loan. To prevent rejections, attempt to pay off any outstanding payday loans and keep them off for three or more months before requesting any other type of loan.