A Payday Loan Could Help Improve Your Credit

Posted on Thursday, September 10th, 2009 at 5:14 pm in Miscellaneous Cash Loan Info

You’re probably well aware of the fact that it’s important to have an unblemished credit report and a good credit score. Whether you want to apply for a loan, find a job or sign up for a cellphone contract, your credit can make the difference between a “yes” and a “no”, and can also determine how much you pay for a loan or a service.

One of the few instances where your credit doesn’t matter is when you apply for a payday loan. Most lenders don’t check your record at all, however they do normally report to the major credit bureaus when a customer takes out a loan and then pays it back on time. Both these facts are good for you, the borrower, especially if you’re trying to improve your credit.

Here are three ways in which obtaining a payday loan can help you rebuild your credit, or simply keep it in good shape:

1. Avoid a credit check: When you apply for most types of loan, the lender will check your credit as part of the approval procedure. Many people don’t know that the credit check itself can actually hurt your score. In contrast, you can get a payday loan or cash advance without having a credit check done, so there’s no risk of damage. This means that if you need a bit of extra cash to get you through a rough patch, a payday loan could be a wise choice compared with a loan from a large bank or other traditional financial institution.

2. Be rewarded for paying off your loan on time: Your payday loan issuer will report to the three major credit agencies (Experian, Equifax and TransUnion) if you’re late paying back your loan, or if you go into default. Equally, though, they’ll tell the credit agencies if you do manage to repay on time, and this will be noted on your credit report and can help boost your score. Paying back your loan ahead of time can win you even more brownie points with the credit bureaus, and some consumers use payday loans for this purpose alone even when they don’t really need the money.

3. Correct your credit record when necessary: Even though most payday lending firms don’t check applicants’ credit, a lot of people do check their own records before seeking a loan (this doesn’t hurt their credit). In some cases, they discover mistakes on their credit reports due to slow errors, typing errors or even mixups with people who have similar names or social security numbers. You’re entitled to dispute any incorrect information on your credit report, and ask for it to be fixed. You can gain several points on your credit score by doing this.

So you see how a payday loan can be useful for more than paying for a financial emergency. Used cleverly, it can also help to raise your credit score, which will save you money in the long run.

Related posts:

1. Cash Advances Improve Your Credit Score
2. 7 Credit Score Pitfalls
3. Cash Advances for People with Bad Credit
4. Credit Cards vs Payday Loan s
5. Save Your Credit Score with Payday Loans