Can Payday Loans Affect Your Credit?
Payday loans are usually a quick boost of cash into your wallet just before your normal paycheck from your job will hit your bank account. They help you pay unexpected bills or expenses, get needed groceries, or just make it through to the next paycheck. The downside to these payday loans is that if you’re not diligent in paying them back quickly, the fees you pay for the loan can add up quickly to an amazing amount of money. Is this affecting your credit?
It All Depends…
Not all payday loans are the same and thus, not all of them will affect your credit - directly (see below). Some payday loans can affect your credit very directly, and it all depends on that lender’s policies when issuing you the loan.
Did the lender ask for your social security number? If they did, it can affect your credit for non payment or non-timely payment very easily. Fewer lenders are bothering with social security numbers lately; however, finding that there are other, less invasive ways of enforcing a loan that is taken out by their customers.
Banks Can Affect Your Credit
Certain types of payday loans require you to write them a check for the loan amount with the first installment. This gives the payday lender access to your bank account and information which means they can do certain things to that account (like deposit the check and bounce it), which will affect your credit indirectly.
The Legal Authorities Can Affect Your Credit
Even if you don’t give your social security number, but just give some other identifying information like your address and drivers license number, payday loan stores can notify the authorities if you default on your loan agreement. Though this rarely happens, it is possible that these authorities can, in various ways, affect your credit negatively as well.
No matter which lender you choose to go with, it’s best to be prudent and plan very carefully to pay them back as soon as possible. Don’t assume that because they don’t have access to your social security card that if you default on your loan they can’t affect your credit one way or another. If you find yourself having trouble paying back a payday loan or two, consider other options that are available such as consolidating your payday loans into a personal loan instead.
