Payday Loan Approval and Credit Report — Will There Be a Correlation?

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If you are worried whether you can receive a payday loan because of problems related to your credit score, there are several things that you must be aware of. First of all, credit scores can be changed and you can directly affect how they change. Another important thing is that you can receive your credit report from any credit bureau if necessary.

Every single lender uses some form of background checking in order to assess possible risks of lending money. No one wants to risk money for no reason and lenders are afraid of give money to people with bad debt. This leads to a particular situation when banks and payday lenders need to know whether a person is a reliable borrower.

This is where credit bureaus come into play. These companies use various metrics to evaluate potential borrowers and provide a special score that determines whether it is safe to give money to that particular person.


Using Credit Report to Your Advantage

When you come to the office of a payday lender and apply for a credit, the company will conduct a simple background check by looking at your credit history and current score and determine whether you can be trusted as a borrower. One of the problems that was evident in some states is that payday lenders sometimes ignore some aspects of the credit score and give money to people who cannot really pay back.

This is a double-edged situation. People with bad credit scores are generally worse borrowers and often generate debt that they cannot afford. Credit score was partially encouraged by such situations and exists to protect customers who cannot pay their debts. On the other hand, such blindly given away credits put lenders in peculiar situations where they need to somehow collect their money but simply cannot due to inability of the borrower to pay back.

Payday lenders work (in the vast majority of cases) with three major credit bureaus: Experian, Transunion, and Equifax. Some of these companies use FICO scoring systems other rely on Vantage score, but it does not really matter which system is being used in general since bad score means disapproval from any payday lender.


What can you do in such situation?

  • First of all, you can apply for a credit is several companies at once. Every lender has their own thresholds regarding the credit score of a potential borrower. If one company said “no”, another one can be much more loyal towards you.
  • The second thing is that you can try to change your credit score. This is not possible in a couple of days, but by slowly increasing the limit on one of your credit cards you can significantly improve your FICO score. In order to start doing something, you will need to receive a special credit report where your score is detailed and presented in a comprehensible form.
  • While your credit score costs money and you won’t receive it for free under normal circumstances, there is a way to get a free credit report according to the Fair Credit Reporting Act. This legislation allows borrowers to receive a free credit report if they were denied a credit in a bank or a registered licensed lender. You won’t receive necessary evidence of denial in an online lending company, but payday lenders will gladly offer you all necessary information that you will need to prove the fact of denial.
  • Then, you will have 60 days to apply for a free credit report. This is why you need to know which type of score and provided by which company is used by the chosen lender. If you were denied a credit, just inquire why and how you can improve your score. Ask about the credit bureau that provides scores to the lender and apply for a free credit report.

The Main Takeaway

Credit score definitely affect whether you are denied a credit or not. However, you can change the it and even receive a free credit report to understand the problem and eliminate it.