Credit Checks For Payday Loans

A woman is looking at her credit report
Credit History & Credit Scores
Part 1 Credit Reports And Credit Scores
Part 2 The FICO Score For Credit
Part 3 How To Improve Your Credit Score
Part 4 Credit Checks For Payday Loans

In the US there are no credit checks if you apply for a payday loan. The cash advances can be secured using only proof of ID, your address and proof of income. In this article we look at:

  • Credit checks and the payday loan market
  • Getting access to a credit report
  • Correcting errors on credit reports
  • The consequences of a bad credit score

The payday loan market is quite substantial and each state has different regulations but none of these regulations insist upon credit checks for applicants. Twelve million US citizens take out payday loans each year and most borrowers end up paying more in charges and fees than they pay in interest. This is because many borrowers take out renewal loans when they cannot afford to make the repayment on time.

Payday loans and credit history

Lenders do not send information about payday loans to credit bureaus like Equifax or Experian. As long as you make the necessary repayment on the designated date, future lenders will not be aware that you applied for and received a payday loan.

A credit agency may have different  information listed to the others

However, if you do fail to make the repayment on time or completely default on the loan, this will be recorded on your credit history. A note of a delinquent account means you have missed a payment deadline and a defaulted account means you still owe the funds. Either of these scenarios could affect your future lending prospects. Payday loans can not only cost you more than alternative methods of borrowing but can put at risk your credibility as a good payer.

How to get access to a credit report

The Fair Credit Reporting Act of 1970 makes it clear that everyone is eligible to have one free copy of their credit report once a year. Further copies within the same twelve month period cost $15 each. The authorized source for credit reports is AnnualCreditReport.com or you can apply directly to any or all of the three credit agencies.

There are sometimes occasions when one credit agency has different information listed to the others. This can happen when a lender notifies one bureau and there is a time gap before they notify the others.

A woman is cross-checking her credit report data

Or, confusion may arise if there is slight difference in names e.g. applications under Daniel Jones and Danny Jones may not be immediately linked. Other differences can occur when a woman has used her single name and then reverts to a married name later. Data can become fragmented but in the end it usually marries up. So, for most of the time the information should be consistent between the three agencies.

Errors on credit reports

Credit reports should be accurate and if you get a copy of your report which has errors there are ways to correct the information. Errors can be the cause of a refusal for credit or can sometimes lead to identity theft.

When applying for a report you need to include your name and address, social security number and date of birth. If you have moved home in the previous two years it is a good idea to include your last address. In order to make sure that the file remains confidential, the agency may ask for confirmation about certain regular payments or other facts which are on file and that only you will know.

Correcting the errors

Write to the agency with details about the incorrect information and include copies (not originals) of any relevant written evidence to back up your claim. e.g. a final statement from a loan that has been fully redeemed. Make a request that the wrong information is corrected or removed and keep a copy of all correspondence with the agency.

A lady is shown working on correcting her credit report errors

Any dispute must be investigated within 30 days and if the agency finds that the information is wrong it will be removed from the credit report. You will receive a written confirmation of the action taken. You can request that the agency send copies of the updated information to any lender who has seen the report in the last six months. While the investigation is underway, a dispute flag should be attached to the report so that lenders can see you are asking to have an error removed.

Consequences of a bad credit score

Having a poor credit score will affect your ability to borrow at the best interest rates and can mean that you get loan deals on worse terms than others. Changing your borrowing habits is the best way to improve a poor credit score and this might involve borrowing very small sums and making regular repayments. Lenders look closely at repayment habits and will decide how much of a risk you really are before approving a loan.

Having poor credit will affect your ability to borrow at the best interest rates and means that you get loan deals on bad terms.

Keep the amount of credit used to within the 30% range and make sure than credit cards are not the only type of borrowing shown on your report. Finally, it is important to remember that a bad credit score is not going to affect your life forever. Any accurate negative information that is on the report and which is affecting your ability to borrow now will be removed after seven years. So, now you have all the lowdown on credit scores and credit reports, you can use the knowledge and information to help make improvements to your financial situation.

Credit History & Credit Scores
Part 1 Credit Reports And Credit Scores
Part 2 The FICO Score For Credit
Part 3 How To Improve Your Credit Score
Part 4 Credit Checks For Payday Loans

About the author

David Warren

David Warren is an expert on personal loans across the United States. His career in banking has helped make David the loans specialist that he is today. He shares his analysis and insight into the personal finance industry on onlinecreditusa.com