If you need fast cash for a one-time emergency-such as medical bills or car repairs-a payday loan can save you the trouble of relying on friends or relatives for the loan. A payday loan is a short-term cash loan usually less than $1,000 that requires payment on the date of your next paycheck. The requirements vary depending on the institution, but is your credit too bad for a payday loan?
The truth is that most payday loan centers do not perform credit checks prior to dispensing cash to customers. Instead, they rely on proof of income to guarantee repayment. If you provide them with a pay stub or your bank statements, they know that you will have money coming in, and can therefore expect payment with reasonable certainty.
Some payday loan centers, however, have begun checking up on credit scores and histories to lower the risk of handing out cash. Most likely, they have been burned far too many times by customers who refuse to repay the loan, and are consequently raising the bar for qualification.
Will They Check Your Credit?
In order for a payday loan center to check your credit history, they must first obtain written authorization from you. This is usually acquired by a short form that you must sign upon application for the loan. If you are worried about your credit disqualifying you for a loan, you might want to ask in advance if a credit check is required.
Remember that your credit history is "flagged" each time a business or individual accesses it, which can lower your score over time if there are too many inquiries. For this reason, you don't want to apply to fifteen payday loan centers over a two-week period if they are going to check your credit.
How Bad is Too Bad?
Generally speaking, payday loan centers have lower standards for credit histories and scores when approving customers for loans. For example, to get the minimum $2,000 short-term loan from Washington Mutual, you must have a credit score of at least 650. At Check 'N Go in Houston, Texas, however, customers need only a credit score of 550 for approval.
Even though the standards are lower, however, major delinquencies might hurt your chances of qualifying. Talk with a representative of the payday loan center prior to applying to determine the likelihood of approval.
Improving Your ChancesIf you have bad credit or a low credit score, there are ways to improve your chances of success with a payday loan. First, make sure that you have all required documentation, including a letter verifying employment from your boss. This will help to assure the payday loan center that you have every intention of paying it back.
You can also offer direct-deposit repayment, which means that the amount of the loan is deducted automatically from your checking account on the next payday. This way, you can't just remove the cash and allow your check to bounce for repayment; it will give the loan center more confidence in you.
And finally, you can always find a payday loan center that doesn't require a credit check for approval. These institutions often charge higher fees, and they might need more paperwork, but it's worth it if you need the money quickly.
