How long do payday loans stay on the credit report?

Once you take out a payday loan it can stay on your credit report for up to seven years. This initial credit origination on your reports will not necessarily be harmful, even though some prospective lenders may see a past payday loan as a red flag. What will be more impactful on your credit report is going to be repayment with your payday loan. 

Online payday loans come with extremely high interest rates and as the name suggests need to be repaid in a short amount of time, averaging between pay periods—usually within a few weeks.This high APR coupled with a short repayment period creates the perfect storm of financial hardship for borrowers. 

Most borrowers who take out these loans often make late payments or default on their loans. What should make you uneasy is that many payday loan organizations know this, and actually have something called rollovers in place (some states have banned this practice). Rollovers allow borrowers to pay a fee to delay paying back the loan on the due date. 

Some states allow for multiple rollovers in one loan contract. Loan rollovers do provide more time for a borrower to repay but they will mean even more interest and fees. Any system that exists within itself to correct its own faults should be a giant red flag, especially when borrowing money! Rollovers do not even guarantee that you won’t miss the next payment date or default on the loan—which have a huge negative impact on your credit reports. 

Even one missed payment will remain on all three credit reports for up to seven years and will bring down your credit score. Your payment history is actually the most significant factor that makes up your credit score. By signing up for a loan that makes it easy for you to miss a payment, you are setting yourself up for financial harm. Not to mention, that multiple missed payments and loan default will make it extremely challenging to access financial products for up to a decade! The best thing you can do for your credit scores and credit reports is to keep payday loans off of them.

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