The simple answer to the question in most cases is 'yes', however not in the traditional way in which credit checks are viewed. Payday loans are essentially designed for individuals in the credit market that have little to no credit, or those with less than perfect credit histories. Although many lenders still require a credit check for the purpose of verifying the borrower's identity, neither the interest rate nor the allowable funding for the loan are affected by the borrower's credit rating.

As an alternative to financing the borrower based on credit rating, payday lenders utilize the borrower's work history, bank information, residency, and salary base to qualify customers for loans. The applicant must provide paycheck stubs, bank account statements, and proof of residency when applying for the funds. A credit check by the lender then verifies that all information provided by the applicant is true and correct. Should the applicant fail to disclose information on the application that is verified by the applicant's credit report, the lender may choose to deny funding the applicant's request.

The lenders are able to conduct payday loan transactions in such a manner because the loan is essentially secured by a post dated check from the borrower. In exchange for funding the loan, the borrower issues the lender a check dated for the borrower's next payday in an amount including: the entire loan principal, the interest, and any other lending fees. This practice creates a low-risk transaction for the lender because if the borrower chooses not to return on the agreed upon term date to repay the loan, the lender can simply collect the funds with the check issued by the borrower.

Although a lender may check the borrower's credit to determine that the information the applicant provided is true and correct, the lender does not utilize the information to determine the principal or interest on the loan. The only adverse affect an applicant's credit history could have with this type of lender would be if the applicant's credit report reflected a negative collections account from a previous payday lender, or the applicant failed to truthfully disclose information on the application.

Eoin has written for many publications in his native south Wales and further afield. He currently lives in London's trendy Docklands with his partner. Both are regular faces in West End theatre audiences.