Payday cash advances are part of a subset of bad credit loans called “loans without credit checks”. Since these lenders without credit checks do not perform any checks of your credit history during the application process, they do not report your payment information to the credit bureaus either. Payday loans are not listed on credit reports. Payday lenders don't typically perform credit checks on applicants, so requesting one won't appear as a harsh query on your credit report and they won't notify credit reporting agencies when you receive one.
Because these loans go unnoticed, they don't help or hinder your credit history if you pay them as agreed. Most store payday lenders don't consider credit reports or traditional credit scores when determining. They usually don't report payday loan history to credit reporting companies across the country either. A payday loan usually doesn't appear on the credit records of Trans Union, Experian, and Equifax, which are three major credit reporting agencies.
However, special credit reporting agencies may collect your payday loan history. Lenders can keep this in mind when you apply for loans in the future. This is how payday loans affect credit rating. If you don't pay a payday loan, your file may enter the collection process and a debt collector can report your debt to major national credit bureaus.
This is really the only time when payday loans will affect your credit rating. If you get a payday loan and pay it on time, you'll never have any problems. A payday loan is usually a short-term loan with a high interest rate that is supposed to be repaid in full the next payday (or when you receive alternative income, such as a pension or Social Security). It may surprise you, but people actually apply for a second payday loan (from a different company) to pay off their first payday loan.
Even if a person doesn't default on a payday loan, there are still plenty of reasons why payday loans aren't the best idea. Because payday loans and on-time payments are not reported to any of the three national credit bureaus Equifax, Experian and TransUnion, there is no way these payday loans will help improve your score. As with most loans, payday loans have implications on your credit rating, which may affect your ability to obtain payday and other types of loans in the future.