A payday loan isn't going to affect your credit directly. But there are other ways that a payday loan can potentially help your credit score. Here are just a few of them.
1. Avoid Collections Accounts
Having an account in collections is one of the worst things that can happen to your credit. Avoid this by paying off your debts quickly through your payday loan. Your payday loan can be used to pay bills that are already delinquent, saving them from being forwarded to a collections agency.
2. Pay Off Existing Debts
Another way you can improve your credit score is by paying off existing debt. You can pay down credit accounts, for instance, for a fast boost to your credit score. If you're worried about your credit score going down due to high credit utilization, this could be a good strategy.
3. Keep Your Utility Accounts Current
What happens to someone without credit? If you haven't established a credit history yet, your utility bills will usually be used as credit. Creditors will often want a letter from a utility company saying you've paid your bills on time. With a payday loan, you can prevent your utility bills from falling behind.
4. Pay for a Deletion
Do you already have a collections account on your file? You can call them and ask them for a "pay for delete." This is when you pay a settlement amount towards the debt, and they delete the debt from your credit report. If you're trying to fix your credit report fast (such as trying to improve your credit so you can get a new credit line), this can be helpful.
5. Get a Prepaid Card
You can use a payday loan to secure a prepaid credit card, if you don't already have a credit card. Once you get a prepaid credit card, you'll have an accessible line of credit that you can use to begin building up your credit history. If you need to establish a credit history quickly and have no other method of doing so, purchasing a prepaid card works, and then you can use the funds on the prepaid card for your expenses.
Payday loans are an excellent tool when used well, but make sure you know the risks when you get one. They'll need to be paid back on time, or they could hurt your credit: a delinquent loan will eventually be reported to the three major credit bureaus. Call a business like Advance U Cash for more information about payday loans.
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