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Anyone can find himself in a tough financial condition at times. At such situations people can look out for safe payday lenders.

But be sure that like other loans, this one can also impact your credit score if you fail to abide by any conditions mentioned by the lenders.

Will Taking Out A Payday Loan Directly Affect Your Credit Score?

If you are running short of money or need an urgent loan for car repair or medical expenses you can apply for a payday loan. If apply for a payday loan it will never likely impact your credit score.

This is because most of the lenders of a storefront will not be running any credit check.

If a person makes timely repayments for his availed payday loan, it would not be improving his credit score as most of the lenders of payday loans never report to the National Credit Bureaus.

So if a borrower manages to repay the loan back in 2 weeks, it will not aid or even impact his credit score.

But as most of the people make a plan of repaying a loan within the scheduled time, not having sufficient income, as well as other sudden costs, can stop many borrowers from repaying their loans on a scheduled time.

If you default on a payday loan it can impact your credit score in a negative way.

How Can A Payday Loan Affect A Borrower’s Credit Score?

There are some ways by which a safe payday loan can affect a borrower’s credit score. Few ways are mentioned below:

Bounced Cheques:

Most of the payday lenders will ask a borrower to write them a post-dated cheque that corresponds with the borrower’s next payday.

If he does not maintain sufficient balance in his account when that scheduled date comes and the loan is not renewed, it typically results in bouncing of a cheque. If he is unable to repay the bounced cheque, your account can be closed by your bank and it will be sent to a collection agency.

A collection agency can report such an incident to the credit bureaus. Or in other words, a payday loan needs that you give a cheque for the overall amount of the payday loan along with extra fees. The cheque will be held until your payday loan is due.

Then the lender can cash out the cheque. If there is no fund in your bank account for covering the overall cheque amount, you will be ending up with a bounced cheque. Bounced cheques will never impact your credit directly.

But if a cheque gets bounced and you do not repay it, the bank will send your account to collections. If the collection agency reports your issue to the credit bureaus it will impact your credit score in a negative way.

Collection Agency:

A safe payday lender can also send any debt of a borrower to collections if he is unable to keep up with his scheduled repayments.

If a debt collection agency reports it to the national credit bureaus, it will affect your credit score negatively.

If a lender of a payday is seen to file a lawsuit against a borrower and he fails to attend his court date or lose the case or do not pay the judgment, this reported information will be impacting your credit till seven years.


A payday lender or any collection agency can sure borrower for collecting unpaid loans along with fees.

Taking a safe payday loan will not necessarily impact your credit score negatively, but the repercussions of a payday loan debt might.

With almost most of the payday loans that are renewed or rolled over, it is quite obvious that the debt trap of a payday loan is real.

For various people it leads to monthly repayments that are unmanageable and availing one payday loan after another for covering the increased interests as well as fees from the previous loans.

Such a cycle will lead any people into different financial situations unfortunately where they will never be able to clear off their debt and it will result in some negative repercussions on a person’s credit.

Other Loans:

A payday loan can affect your credit score indirectly by making you a defaulter on any other loan or credit card.

For instance, if you are unable to pay your student loan as you require to put the money on a payday loan, this will impact your credit score.

A payday loan debt can look to be different from a standard personal loan or any credit card debt, they actually work similarly if you are unable to repay the borrowed money.

The debt will be sent to collections and it will end up affecting your credit score negatively.