You may be aware that payday loans are available for borrowers who do not have a good credit score. Those with excellent credit score need not worry anyway and they are likely to apply for short term loans with their banks. It is mostly borrowers with an average or poor credit score who opt for unsecured short term loans from private lenders. Many lenders dealing in payday loans will advertise that they do not perform a credit check and that their short term loans are available for people with an income regardless of their credit history. This is true but not entirely. Some lenders will conduct a credit check.
Payday Loans and Credit History
Payday loans are offered on the basis of your income. When you apply for payday loans or short term loans through Payday Pug, your basic personal and financial details will be validated. Then your income would be taken into consideration to determine the loan amount you qualify for. You can also assess your own loan eligibility and apply accordingly. This will help you get approved for payday loans faster. Lenders of short term loans will not offer you an amount that they think you cannot repay on the basis of your income.
Nowhere in this process does your credit history come into play. However, some lenders will check out your credit history to determine if you are a safe investment for them. Those who have really poor credit scores will not be the best borrowers from the perspective of the lenders. This does not mean that such borrowers will have their applications rejected. Some lenders will simply note that the borrower is risky or not entirely dependable but they may still offer a loan. Some lenders will raise the rate of interest or reduce the loan amount. Such measures mitigate the risks of lenders. You may or may not get to know why a particular rate of interest is higher or why you are being offered a reduced loan amount.
A few lenders will be more forthcoming. They would tell you that your credit history is poor and hence they have to offer a smaller sum of money or that they would only be able to offer you a loan if you agree to a higher rate of interest. Other lenders will remain quiet and simply present their proposition without bringing up your credit history. As you may realize by now, your credit history does have a role to play in some cases. Short term loans are not entirely dependent on credit history and payday loans definitely don’t involve credit check as a qualifying criterion. But credit history will not be completely irrelevant for some lenders.
Payday Loans and Credit Score
While your credit score may not render you ineligible for payday loans, the repayment of such short term loans will reflect on your credit score. If you repay on time and be done with the entire loan amount within the stipulated term, then this will reflect positively on your credit score. You should make sure that the lender of payday loans reports such a development to the credit bureaus and agencies. If you don’t repay on time, then that would reflect negatively on your credit score. In other words, timely repayment will improve your credit score, regardless of what your credit history was at the time of getting approved for the loan. Failing to repay will further reduce your credit score.
All lenders of secured or unsecured short term loans report their experiences with borrowers to the credit bureaus. They would always report negative experiences. You cannot help but deal with the negative fallout of having an unpaid or unsettled debt. Even settling a debt will reflect negatively on your credit history. Your focus should be on the positive fallout. If you are repaying on time and have repaid the entire loan with all the accrued interest, then you should observe if your credit score improves as a result. If not, ask your lender to report the same to the credit bureaus. An improved credit score will make you more readily eligible for payday loans through Payday Pug and other short term loans from banks and financial institutions.