Keep Track of Your Credit Score to Avoid Payday Loans

The relationship between payday loan usage and credit scores is a bit complicated; although payday loan lenders do not require credit checks, they do report to credit agencies if a loan goes into default. Because lenders do not require a credit check, however, many people with lower credit scores utilize these services, as they are often the most desirable options available, despite the fact that they charge high interest rates.

While high interest rates are intimidating in themselves, it is the cycle of loan borrowing that is the most detrimental to individuals who use these services. The interest on one payday loan may be a little hard to swallow, but the compilation of loan upon loan, with all the associated fees, is bound to choke the borrower.

How can a person avoid a situation of cyclical borrowing? One way is to keep track of one's credit, taking care to maintain a high FICO score.

The Federal Trade Commission grants one free credit check per year in order to help Americans keep track of their credit scores. You can easily access your credit score by visiting the website AnnualCreditReport.com. This secure website is the only government approved site for free credit checks and it delivers credit reports from the three primary reporting agencies: Experian, Equifax, and TransUnion. Keeping tabs on the changes in one's credit score is crucial to maintaining financial health, as regularly checking one's credit can indicate fraudulent activity and bad credit habits. Awareness of what is hurting one's credit is the first step to fixing the problem.

Consumers should be wary of non-governmentally approved credit reporting companies, however, as they often charge fees for usage of their services and require subscriptions, which are often hard to cancel. Often, a non-governmentally approved "free" credit report site is anything but free. Such sites ask for credit card information and enroll individuals in subscriptions, wherein said individual can regularly check his/her credit but at a cost. These sites charge the consumer a subscription fee on a monthly basis, thus costing money and potentially adding to credit problems. Therefore, only check your credit through the aforementioned, government approved free site.

Having a healthy credit score substantially expands the resources available to an individual should an emergency arise. Because payday loans are meant to be used for small amounts and for a short period of time, they aren't always the best option when one is in a financial emergency. With good credit comes the opportunity to take out more substantial, longer term loans with lower interest rates.

Furthermore, a strong credit score improves one's chances of securing a low interest car loan or mortgage. A reliable car to drive to work and a roof over one's head are two of the most important material items for a person to own. Good credit makes obtaining these items far easier and far less pricey. Additionally, unlike payday loans which do not help to build credit, home and car loans can greatly impact one's credit score.

Clearly, keeping track of one's credit is a wise move. Not only will it reduce payday loan reliance by granting an individual more credit options, but it will give a consumer the opportunity to fix any credit issues and the peace of mind of knowing that they are on the path to financial fitness.