How will a payday loan effect my credit score?

Last Modified 16th of February 2021

It could affect your score in a few different ways, so it depends. Taking out a payday loan certainly shouldn’t hurt your credit. Let’s explore the scenarios:

If you take out the loan and fail to repay it on time then as with any type of credit your score will be negatively impacted. Of course, this goes without saying and you certainly shouldn’t take out such a loan unless you are 100% sure you can pay it back.


While you have the loan, it may in principal affect your ability to borrow from elsewhere, but if that does happen it will only be short term anyway. As soon as the loan is paid off it will not have any negative impact on your borrowing capacity.

Once paid off the additional credit history should have a positive impact on your credit score, since it is credit that you have taken out and paid off successfully. So once it is reported to the credit agencies your history will be adjusted accordingly and your score may improve.

But it may not have any effect

Normally lenders report account information to the credit agencies every month, and depending on how the lender does this reporting, the information about your loan may never be passed on. This might happen if you take out a one week loan and pay it off in full right away. If the company does not report your loan before it is paid off it may never be reported. Check with the lender to see how they report credit information.

What about credit checks?

The other piece of the puzzle is credit checks, of course. Many payday loans don’t require credit checks, in which case this point is moot. If your loan does require a credit check then this could harm your credit score in the short term, but that is unlikely to be a significant factor unless you make many applications close together.