I heard that taking out a payday loan can help rebuild my credit or improve my credit score. Is this true?
Answer: Probably not. Payday loans generally are not reported to the three major national credit reporting companies, so they are unlikely to impact your credit scores.
Most storefront payday lenders do not consider traditional credit reports or credit scores when determining loan eligibility. They also do not generally report any information about payday loan borrowing history to the nationwide credit reporting companies.
However, if you don’t pay your loan back and your lender sends or sells your payday loan debt to a debt collector, it is possible the debt collector might report this debt to one of the major national credit reporting companies. Debts in collection could hurt your credit scores.
Likewise, some payday lenders bring lawsuits to collect unpaid payday loans. If you lose a court case related to your payday loan, that information could appear on your credit reports and may lower your credit scores.