Do cash advances hurt your credit score?

If you're considering a cash advance on your credit card, you may be wondering if it will have an impact on your credit score. Let's take a closer look.

Do cash advances hurt your credit score?

A cash advance does not directly affect your credit rating, and your credit history will not indicate that you borrowed one. However, the cash advance balance will add to your credit card debt, which can hurt your credit rating if you increase your credit utilization rate too much. The cash advance is added to your balance, which changes the use of the credit. Credit utilization is a score that measures how much of your total credit you use.

Ideally, you should keep this number below 30%. A cash advance could easily cause your use to exceed that number and damage your credit rating. Does a Cash Advance Affect Your Credit Rating? In many cases, it can have the potential to. As long as you apply for loans online, such as installment loans, and your repayment activity (including non-payment) is reported to a credit reporting agency, your credit rating may suffer.

If you start to lose payments, this can have a negative impact on your payment history, which is an important part of how your credit score is calculated. Even if you request a cash advance from your credit card and it doesn't appear as an own item on your credit report, this can affect your credit utilization ratio, which is the amount of debt you have in your revolving credit accounts relative to the amount of available credit you have in all accounts. A cash advance can be useful if you desperately need money right now, but like a payday loan or car title loan, a credit card cash advance can quickly lead to a debt burrow that will put you in debt and could destroy your credit score. Typically, businesses with poor credit use cash advances to finance their activities, and in some cases, these advances are paid with future credit card receipts or with a portion of the funds the company receives from sales to its online account.

However, there are some very important differences between cash advances and regular credit card transactions. Along with separate interest rates, credit card cash advances have a separate balance from credit purchases, but the monthly payment can be applied to both balances. If you are considering applying for a cash advance, or making any important financial decisions, the best thing to do is to learn about these issues as much as possible. There are many reasons why you might need quick and easy access to cash, and thankfully, there are some alternatives to paying the high fees and interest associated with cash advances.

For example, a cash advance could help if you're buying a used item at a garage sale and your paycheck hasn't yet reached your account. Because, while cash advances will not be noted in your credit score, a higher credit card balance will be noted and it could hurt your score if you increase too much. If you live paycheck to paycheck, you should also consider how a cash advance will affect your credit score. It's important to be able to answer these questions and more if you're thinking of applying for a cash advance.

Your limit for cash advances may also be separate and lower than your credit limit; check with your credit company for account details. But cash advances can be disastrous if the borrower is about to file for bankruptcy, needs to pay a credit card or other bills that have interest rates, or simply wants the money to buy more products. While credit card cash advances are far from being a perfect financial solution and won't help increase your credit score, they are much more preferable to “cash advance loans” which are actually just payday loans in disguise.