Most financial services or transactions have the ability to hurt your credit score if managed poorly.
When it comes to payday loans, most lenders do not pull your credit to approve you for a payday loan, and these lenders do not report the loan, payment, or default of the loan to the credit bureaus. The trouble happens if the default is turned over to a collections agency. Then, it ends up on your credit report and can hurt your score for up to seven years, even if you pay the collections amount or any judgement against you.
According to consumer watchdogs like the Federal Trade Commission (FTC), this isn’t the most hurtful aspect of payday loans.
How payday loans can hurt your credit
Even though payday loans typically do not show up on credit reports from major agencies like Equifax, Experian, or TransUnion, there are some specialty credit reporting agencies that can collect payday loan history and make it accessible to lenders so it could affect future loan approvals.
If you fail to repay your loan and the debt is sold to a collection agency, they typically do report accounts in collections to the major credit bureaus, which would in turn hurt your credit score. Additionally, if any collections agencies or payday lenders take you to court over unpaid loans and fees and you fail to appear or lose the case, this information will also be recorded on your credit report and impact your score for up to seven years.
Payday loans effectively make each of your paychecks smaller as you work to pay back the amount borrowed plus any associated fees, making it increasingly difficult to get out of the payday loan trap and pay your monthly bills based on your actual income.
Let us help you
When you’re struggling with payday loans or other debts, a debt assistance and credit counseling program can provide the tools you need to get back on your feet. Here at Progressive Debt Relief, we will walk through your financial situation, provide you with advice, help create a plan to suit your needs, and can even help settle payday loans and other unsecured debt.
We are determined to ensure you have the tools necessary to avoid future financial distress, and we strive to help you establish a debt free life with the peace of mind that comes with financial security.
To find out more about our services, or to schedule a complimentary consultation, contact us today.
