When a borrower applies for a quick cash loan, the lender may conduct a hard inquiry on their credit report. A hard inquiry is a record of a lender checking a borrower's creditworthiness. Multiple hard inquiries within a short period can lower a borrower's credit score, as it may indicate that the borrower is seeking excessive credit. However, if a borrower is shopping around for the best loan terms, most credit scoring models will group multiple inquiries for the same type of loan (such as a personal loan) within a short time frame (usually 14 - 45 days, depending on the credit scoring model) as a single inquiry. So, borrowers should try to complete their loan shopping within this time window to minimize the negative impact on their credit score.

If the borrower is approved for the quick cash loan and receives the funds, the loan will be reported to the credit bureaus. Timely payments on the loan can have a positive impact on the borrower's credit score. Making payments on time shows that the borrower is a responsible debtor. For example, if a borrower takes out a quick cash loan from a lender like Discover Personal Loans and makes all their payments on time, it can help build or improve their credit score. This is because payment history is a significant factor in credit scoring models, typically accounting for around 35% of the FICO score.

On the other hand, late payments or defaults on quick cash loans can severely damage a borrower's credit score. A late payment can stay on a borrower's credit report for up to seven years and can lower their credit score significantly. Defaulting on a loan, which means failing to make payments for an extended period, can have even more severe consequences. It can lead to collection efforts by the lender or a collection agency, and the negative mark on the credit report can make it difficult for the borrower to obtain credit in the future. For instance, if a borrower defaults on a payday loan, which often has a high - interest rate and short repayment term, it can quickly lead to a downward spiral in their credit score.

Some quick cash loans, especially those from non - traditional lenders or payday loan companies, may not report to the credit bureaus at all. While this may seem like an advantage in the short term for borrowers with poor credit who are worried about further damage to their credit, it also means that making timely payments on these loans will not help improve their credit score. In the long run, having a limited credit history due to lack of reporting can be a problem when borrowers need to apply for larger loans, such as a mortgage or an auto loan.

Borrowers should also be aware of the credit utilization ratio, which is another factor in credit scoring. If a borrower takes out a quick cash loan and it significantly increases their overall debt compared to their available credit, it can negatively impact their credit utilization ratio. For example, if a borrower has a credit card with a \(10,000 limit and already has a balance of \)5,000, and then takes out a quick cash loan of $3,000, their overall debt has increased, and their credit utilization ratio may rise, potentially lowering their credit score.

In summary, quick cash loans can either help or hurt a borrower's credit score depending on how they are managed. Borrowers should carefully consider the potential impact on their credit before taking out a loan and make sure they can afford to make timely payments.