Less than 1% of Americans can claim that they have a perfect credit score, according to Creditdonkey. While 20.4% of Americans have a score that ranges between 800-850, there are many others on the other end of the spectrum. Unfortunately, such people have a tough time getting loans at suitable rates.

If you have an extremely low credit score, the chances are that you might not even be eligible for normal loans. Luckily, most payday loan lenders focus minimally on your credit score, and this can turn out to be helpful when it comes to getting you out of an urgent financial situation. To make matters better, such loans can also help increase your score.

Here are the details on how payday loans can be useful as a credit-score-boosting tool:

Why You Need To Have a Great Score

Credit scores have a foothold in the life of the modern-day borrower. For instance, in the housing market, they can help you land an elusive apartment. In competitive markets, landlords will typically look at your score. Since high credit scores are a sign of financial responsibility, the chances are that you can handle offsetting the rent of the apartment.

On the other hand, a high credit score can also help you land your dream job. Some jobs such as being an accountant will require you to have high levels of financial responsibility, and credit scores will help tell the responsible applicants from the irresponsible ones. As a result, using easy payday loans to better your credit score could be worth your while. Payday Loans Improve Credit Score

Payday Loans and Hard Inquiries

When applying for a normal loan, lenders will typically need to look into your credit report. This will leave behind a footprint, often called a hard inquiry, which signifies that you had applied for the loan. While a single hard inquiry will barely harm your credit score, multiple ones within a certain period can easily damage your score, not to mention showcase you as a person in a bad financial situation in the eyes of other lenders.

Payday loan lenders barely assess your credit score when offering loans. Since they will only need to gauge your income and ability to offset the loan, this makes them great for people with a bad credit score. The fact that they don’t access your credit report means that there will be no hard inquiries which will harm your score.

Multiple Applications Will Be Damaging

Payday loans can also be a great way to diversify your credit mix, which will increase your score in some credit scoring models. However, they can only be helpful in case you stick to the loan agreement you had with your lender. Failure to follow the agreement could be detrimental to your score.

You should be aware that taking on multiple payday loans at the same time will showcase you as a borrower who is in a tough financial position to other lenders. This could easily lead to a debt cycle, where the interest rates of formerly unpaid loans snowball into even bigger rates.

Should You Apply For a Payday Loan?

Payday loans are best when used in emergency situations. Given that they demand high APRs, it is wiser to avoid taking them out when you only want cash to fulfill luxurious activities. It is paramount only to apply for such loans if you have the ability to offset them comfortably.

Since the loans are designed to be paid within the next payday, then it is vital to account for other expenses when choosing to apply for the loan to ensure that you will still go through the next month without facing any financial challenges. Otherwise, you will either have to pay a higher interest rate were you to carry forward the loan to the next month, or you will have to overlook paying some expenses.


Since payday loan lenders accept people with bad credit, these loans can be a great way to boost your score. Your chances of success will trickle down to how well you handle the loan. Only apply for such loans if you can comfortably handle the financial obligations that they come tied with.