Will a Cash Advance Show up on Your Credit Report?
When you need cash during an emergency—and you don't have an emergency fund—it’s common to only think about the short-term. Who cares how much the online loan from RealLoansNotaScam.com costs? Forget that this “lender” you discovered on Craigslist is a guy handing wadded-up one dollar bills out of the back of a Winnebago—you need cash and you need it now!
And yet, these long-term considerations can come around to bite you, so it is essential to keep them in mind. Let's take cash advances for example. If you take one out, will it end up on your credit report? How will it affect your credit score? What is a cash advance anyway?
That’s why we’re here. So sit back, take a deep breath, and remain calm as we address your questions about cash advances, credit reports, and how the two are related.
How do credit reports work?
Credit reports are documents that contain a record of your borrowing history. They include details such as outstanding balances, history of on-time payments (and any late or missed payments), the types of loans and credit cards you've taken out, accounts that have been sent to collections, bankruptcy filings, hard credit checks, etc. Most of the information on your credit report remains there for seven years, although some information, like bankruptcies, will stay on your report for longer.
These reports are created and maintained by the three major credit bureaus: Experian, TransUnion, and Equifax. Since some lenders, debt collectors, landlords, etc. might report consumer data to some but not all of the bureaus, information can vary across the reports. Therefore, you don’t have one credit report; you have three. Hence, your credit score can change depending on which credit report was used to create it.
What is a cash advance?
There are two types of cash advances. The first type is a feature integrated on your credit card, where you can use the card to withdraw cash. The amount of cash that you withdraw (plus an extra fee and ATM fees you might incur) is then added to your credit card balance the same way that a regular purchase would.
Aside from the additional cash advance fee, credit card cash advances differ in a couple of key ways from typical credit card transactions. Firstly, they have a higher APR than standard transactions. Secondly, there is no 30-day grace period for interest on these transactions; once they are added to your balance, interest begins accruing immediately. All in all, taking out a cash advance on your credit card incurs significantly more costs than simply using your card to make a purchase.
The second type of cash advance pertains to a short-term no credit check loan. Similar to payday loans, these "cash advance loans" are advertised as being an “advance” on the borrower’s upcoming paycheck. The typical repayment term for these loans is approximately two weeks, after which time the loan is to be repaid in a single lump sum.
The interest rates for these payday cash advances are extremely high, with an average APR exceeding 300%. While these interest rates look reasonable in the short-term, the difficulty that many customers have in repaying these loans can often mean rolling their loan over or paying it off and immediately borrowing a new one.
Are credit card cash advances added to your credit report?
The answer to this question is: kinda. Any changes on your credit card balance whether it is adding or subtracting to the balance, is recorded on your credit report. Therefore, a credit card cash advance will show up on your report as an increase to your credit card balance, but it won’t be noted any differently than a regular transaction would be.
So can a credit card cash advance negatively affect your credit? It's possible, but it’s not likely. When it comes to your credit card balances, it’s a good idea to keep them pretty low relative to your total credit limit—even if you pay off your balances in full every month. Keeping your debt utilization ratio under 30% (meaning that you never spend more than 30% of your credit limit) will mostly keep those balances from negatively affecting your credit.
For a credit card cash advance to negatively affect your credit score, it would have to either push your balances above 30% or it would have to be such a substantial increase to your balances that it would reflect a major change to your total amounts owed. Unless you are right under that 30% ratio or are taking out large cash advances in a short period of time, your score may not be affected.
Will a payday cash advance loan show up on your credit report?
The answer here is “no” with a small caveat. Payday cash advances are part of a subset of bad credit loans called “no credit check loans.” Since these no credit check lenders do not perform any checks on your credit history during their application process, they also do not report your payment information to the credit bureaus.
Traditional lenders like banks tend to run a hard credit check when you apply for a personal loan. That hard check returns a full copy of your credit report and gets documented on the report itself. These checks may slightly lower your score and can do so for up to two years. Many bad credit lenders run what’s called a “soft” check on your score, which returns less information and won’t affect your score at all. However, some of these lenders report your payment information, which can potentially benefit your score if those payments are made on-time.
As mentioned above, no credit check lenders do not run any kind of credit check and do not report payment information; however, they do send unpaid accounts to collection agencies. Those agencies will then report the accounts to the credit bureaus (the exception is title lenders, who will repossess your car in order to repay the amount owed). So while a payday cash advance loan will not end up on your credit report and won’t affect your score while in good standing, an unpaid cash advance loan will indeed show up on your report and impact your credit score.