Everything you need to know about no credit check loans but were afraid to ask
Many companies (including ourselves) may advertise something referred to as a ‘no credit check loan’.
The reason why we do this is that we know that most people are really looking for loans where the lender is not worried by a bad credit rating.
We are very clear on our website that our lenders do in fact carry out minor credit checks later on with the application process just to verify that an applicant is not insolvent, though many other loan companies do not make this clear.
- So in this article, we look at the 2 things that many companies will not tell you about loans advertised to have no credit check.
Why do lenders perform credit checks?
When you apply for a loan, typically your prospective lender will have a set of criteria which they will use to decide whether they are prepared to lend to you or not whilst complying with responsible lending legislation.
Experian recently explored the thought process behind responsible lending:
Lenders have a responsibility to make sure borrowers understand the details of a loan and carry out thorough checks on any borrowers, so they can be confident that what customers will receive will be suitable for their circumstances.
For the basics of what will be checked, click here.
How do lenders make their decision?
Lenders use a variety of different things to help them decide how great a risk you pose to them, and often the most important piece of information they can obtain is your credit score.
Essentially this means that a good credit score will result in your application being granted, a poor credit score will see it rejected.
- For more information relating to the decision-making process used by lenders, please take a moment to check out the following Citizens Advice Bureau guide – “How lenders decide whether to give you credit”.
Making loans accessible
Whilst responsible lending should be viewed as a positive, the implementation of new practices by banks and building societies resulted in millions of applicants being unable to obtain a loan from their bank due to the current level of their credit score.
To find a way around this problem, a growing number of innovative lenders now offer loans that are claimed to bypass the credit checking process to make the loan available.
However, in some cases, this is not strictly true and even if the credit check is bypassed, the loan will only be available with a significant drawback.
- If you want to borrow money and pay back a fixed amount every month, a personal loan is one option. Click here for what you need to think about before you borrow and how to make sure you get the best deal for you.
What is the drawback?
Loans which do minimal credit checks, such as payday loans, can be very expensive.
Because of the perceived increase in the risk of lending to someone without credit checking them, payday lenders dramatically increase the APR of their loans to help balance the risk.
Check out the following Guardian article for details on just how expensive a payday loan can be – Wonga: the real cost of a payday loan
Why will I probably still be credit checked?
Even when bad credit lenders claim you will not be credit checked, this is not guaranteed to be completely true.
Although you will not be subjected to a full credit check, lenders will often check your credit history to make sure that you are not bankrupt or insolvent.
Whilst this is not the same as a full credit check, it will still leave a footprint on your credit record which can have a negative impact in the future.
- Would you like to check your credit score?
- You can try checkmyfile free for 30 days, then for just £14.99 a month after, which you can cancel online at any time.
Affordable loan with a poor credit rating
We’re a credit broker and have been helping people with a poor credit rating to get access to affordable credit since 2015.
We specialise in guarantor loans, which can be used for all sorts of purposes, such as emergencies, debt consolidation and more.
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Jon Edward
Happily married with two wonderful girls. Love cycling, curry, and when I get the chance - loud music! See Jon's Profile Page
