Many may wonder, while some may never have asked the question, “Will payday loans show up on my credit report?” Do you know the truth? If you look at your credit report, you’ll notice a list of your debts and payment history. A typical credit report would have your credit card accounts and car or home loans if you have them. If you borrow a payday loan, will it also show up?
The Truth About Payday Loans and Your Credit Report
The purpose of payday loans is to help consumers who are in a financial emergency and need assistance to cover an expense until their next paycheck. Most consumers who apply for payday loans use them to cover rent, high utility bills or an unexpected expense.
In general, a payday loan will not automatically show up on your credit report. As long as you use the payday loan as intended and repay it in full, it will not appear on your credit report.
However, if you fail to repay your payday loan, the lender will either turn it over to a debt collector report the bad debt to one or more of the credit bureaus. Under these circumstances, the payday loan will appear as an unpaid debt on your credit report, which will lower your credit score.
Industry reports indicate that as many as 44% of payday loans result in loan default. Consumers who fall behind on their payday loan can expect to face additional rollover fees and more interest payments.
Under Lender Discretion
For the most part, it’s up to the lender whether or not they will report the bad debt. Smaller lenders may not choose to bother because of the processing time it would take, while other larger nationwide lenders are more likely to report payday loan delinquency.
If you take out a payday loan and pay it back by the time it’s due, the lender won’t report the transaction to the credit bureaus. The reason for this is because these types of loans are not granted based solely on the borrower’s credit history. Also, there is nothing to report if the loan is paid off.