Do Cash Advance Places Check Credit?
Understand how cash advance providers evaluate applicants, clarifying their approach to credit inquiries and other key approval factors.
Cash advances are short-term, small-dollar loans for immediate financial needs until the borrower’s next payday. These products offer quick access to funds, often appealing to individuals facing unexpected expenses. A common question among those considering this option revolves around the credit check process and whether credit history determines eligibility.
How Cash Advance Providers Assess Applicants
Cash advance providers do not rely on traditional credit scores for approval. Instead, they focus on an applicant’s current financial stability and ability to repay the loan. While a full, “hard” credit check is less common, providers often conduct a “soft” inquiry to verify identity and check for major delinquencies or bankruptcies.
The assessment process emphasizes an applicant’s income and employment status. Providers typically require proof of steady employment and a consistent income source, such as regular paychecks or government benefits. Many set a minimum monthly income threshold, often ranging from $800 to $1,000, to ensure the borrower has sufficient funds to repay the advance. They also review bank account activity to confirm consistent deposits and evaluate the applicant’s financial health.
Providers also consider an applicant’s debt-to-income ratio, though less rigorously than traditional lenders. This assessment helps them gauge if an applicant has too many existing financial obligations that might hinder their ability to repay a new advance. The focus remains on the present ability to repay, rather than a comprehensive review of past borrowing behavior.
Types of Credit Inquiries and Their Effect
Credit inquiries are categorized into soft and hard inquiries, each with different implications for a credit report. A soft inquiry occurs when a person or company checks your credit report without you formally applying for new credit. This type of inquiry might happen when you check your own credit score or when a potential lender pre-approves you for an offer. Soft inquiries are only visible to you and do not affect your credit score.
Conversely, a hard inquiry occurs when a lender checks your credit report as part of a formal application for new credit, such as a mortgage, car loan, or credit card. Each hard inquiry can temporarily lower your credit score by a few points, typically between 5 to 10 points, and remains on your credit report for up to two years. Multiple hard inquiries in a short period can signal higher risk to other lenders.
Cash advance providers predominantly utilize soft inquiries to verify an applicant’s information without negatively impacting their credit score. This approach aligns with their business model, which prioritizes income and repayment capacity over historical credit performance. While some models might involve a hard inquiry, most use soft checks, ensuring the process does not harm the applicant’s credit.
Preparing for a Cash Advance Application
When preparing to apply for a cash advance, applicants should gather key documents. A government-issued photo identification, such as a driver’s license or state ID, is universally required for identity verification. This ensures the applicant is who they claim to be and meets the minimum age requirements, typically 18 years old.
Proof of income is a fundamental requirement, as it demonstrates the ability to repay the advance. This can include recent pay stubs, generally the last two or three, or bank statements showing consistent direct deposits from employment or other verifiable income sources. Having these documents readily available can significantly streamline the application process.
Applicants also need to provide details for an active checking account. This includes the routing number and account number, as funds are typically disbursed directly into this account, and repayment is often debited from it. Providing accurate bank details is crucial for both receiving the funds and facilitating the repayment schedule. Current contact information, including a phone number and email address, is also necessary for communication.