The short answer is no, you don't need a credit rating to get a payday loan. Payday lenders often don't check your traditional credit score, so even if you've had financial difficulties in the past or haven't established a credit history yet, you could still qualify. According to the Pew Charitable Trust, around 12 million Americans use payday loans each year, and most of them don't have access to a credit card or savings account. If you have bad credit but need a loan, there are still options available. Not all loans require high credit ratings.
In fact, there are many lenders that offer small loans that could be an option for people with bad credit or no credit. Most store payday lenders do not consider credit reports or traditional credit scores when determining eligibility, nor do they usually report payday loan history to credit reporting companies across the country. Because of this, payday loans are often criticized for being predatory, particularly for borrowers with bad credit. Payday loans are generally not reported to the top three national credit reporting companies, so they are unlikely to affect your credit ratings. In the long term, you can also work to fix the underlying financial issues that lead you to a payday loan counter. If you're looking for a loan with a lender who reports to major credit bureaus, you should look for one that does.
A positive history of repaying loans on time can help you build credit so that you can eventually qualify for loans with better interest rates. To try to mitigate the risk of default and ensure they recover as much of their initial loan as possible, banks charge interest on the loans and lines of credit they provide. In terms of annual percentage rates, it is not uncommon for payday loans to exceed 500% or even 1,000%. And while credit card companies and bank loans are required to report a consumer's timely payments when they take out a line of credit, payday lenders are not required to report payments on time. The dangers of payday loans often outweigh the benefits, so make sure you know exactly what their terms are before you apply. Avant requires a minimum credit score of 580 FICO with an estimated APR ranging from 9.95 percent to 35.99 percent significantly lower than the estimated 400 percent you would face with a payday loan.
With a payday loan, if your check bounces or you can't pay the full balance on the required payday, you may have to transfer the loan to the next payday, accruing more fees in the process.