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Last updated on November 6th, 2023 at 12:44 pm

No, you cannot use a payday loan to build up your credit rating. While you can help to improve your credit score by making on-time payments with some types of loans, for example, installment loans, you will not be able to boost your credit score doing the same with a payday loan.

This is because on-time payday loan payments aren’t reported to Equifax, Experian or TransUnion – the three national credit bureaus.

That being said, it is still important for you to keep up with any and all loan payment, and ensure these are paid on-time, as failure to do so can result in negative consequences.


Can a Payday Loan Hurt My Credit Score?


If you don’t make the expected payments for your payday loan on time this could hurt your credit score. This is why it’s always important to only borrow what you can afford, and ensure that you keep up with repayments on any payday loan you take out.




If you fail to pay back your payday loan on time, the lender may take certain actions that can have an impact on your credit score – most likely damaging it.

Examples of the actions your lender could end up taking that could damage your credit score include:

  • Bringing a lawsuit against the borrower in order to receive the money that is owed. Losing the court case for this can result in a damaged credit score.
  • The lender may end up selling the borrower’s loan debt to debt collectors. A debt collector could then report the borrower, and their failure to repay, to one of the credit reporting companies, ending up in a damaged credit score.

While failure to repay your payday loan on time (or at all) can lead to significant impacts on your credit score, this score won’t be damaged simply by taking one out. In fact, payday lenders might not even use your credit score to decide on whether or not to offer you a loan. They also might not alert the credit reporting companies about this.


How Is My Credit Score Calculated?


Your credit score is calculated using a combination of factors, including the amount you owe, your payment history, the length of your credit history and more.

If you have a high credit score, this will typically suggest you’ve been able to demonstrate a good and responsible history of credit usage. This then suggests to prospective lenders that you are likely to keep up with repayments on any loan they may offer you – due to the evidence of managing payments in the past.

Your credit score is displayed as a three-digit number. This number usually ranges from 300 to 850, depending on the key factors listed above. How good or poor your credit rating is will depend on the credit-scoring model in question. For example, FICO (the U.S.’s primary credit-scoring company), rates these scores as follows:



Do I Need a Good Credit Score to Take Out a Payday Loan?


Not necessarily. While a good credit score is typically favourable, as it gives lenders reassurance you’re able to pay off the loan, some lenders are willing to take a view on those with a less than exceptional credit score.

For example, Pheabs’ partner lenders take a view on a variety of different credit histories, meaning if you have bad credit, you might still be eligible for a loan, subject to further checks.


no credit


When looking to request a payday loan through Pheabs, regardless of your credit score, you’ll still have to meet the following eligibility criteria:

  • You must be over 18 years old
  • You must be a U.S. resident.
  • You must have a live checking account (for the payday loan to be sent to if approved)
  • You must earn a minimum of $800 per month

Find out more about the payday loans companies we work with, the criteria and how to apply.


What Should I Do When I Can’t Keep Up With Repayments?


If you can’t keep up with your payday loan repayments, it’s important to speak to your lender as soon as you start facing these difficulties. Your lender may be able to work with you to help rearrange the terms of your loan and make a more affordable repayment plan. This can include being given an extension on the loan, or having extra time to pay the loan off.

If you do not repay your payday loan, or pay this back late, you could be charged additional late fees, and could also have your credit score damaged as a result.


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