A credit check is a major obstacle that so many borrowers never manage to overcome. So many lenders have impossibly high standards for lending, and that’s one of the reasons why getting credit has never been more difficult. But do all lenders perform credit checks for their loans?
You might be surprised at the answer.
Why Do Lenders Have an Obsession with Credit Checks
It seems that every lender has an obsession with the credit score. This arbitrary number on the screen is influenced by a number of factors but is supposed to symbolize whether someone presents a lending risk. Low credit scores can indicate that someone has failed to pay back money in the past. But someone can also have a low credit score simply because they haven’t borrowed often enough. Lenders like to use credit checks because they require no effort on their part. They don’t need to investigate into an applicant’s history, which saves them a lot of time.
Do All Lenders Use Credit Checks?
Not all lenders use credit checks. You can find some online loans with no credit check. Some lenders have determined that credit checks aren’t an accurate reflection of someone’s ability to pay the money back. If someone entered bankruptcy eight or nine years ago, it could be the case that they’ve completely changed their behaviors. They aren’t the same person as before. These lenders realize people change and use alternate means to assess someone’s credit worthiness:
Salary – The more you make the more you can repay every month, in theory. It’s one of the main alternate factors used by lenders.
Stability – Lenders want to see that borrowers have a stable career. Someone who switches jobs constantly may find themselves without an income for a certain length of time, and that could impact their ability to pay.
Age – Age is a direct link to stability. The young are less likely to have a stable career and so are considered to present more of a risk, for example.
What’s the Catch with a No Credit Check Loan
No credit check loans work in exactly the same way as a conventional loan. You borrow the money for a specific period of time and then pay the money back. The difference is with a no credit check loan interest rates may be slightly higher or there may be other conditions attached. Some lenders may require you to put up collateral. Other lenders may want you to have a guarantor. But in general the interest rates will be higher and you may be able to borrow less.
Are No Credit Check Loans Better
It depends on what someone means when they refer to them as ‘better’. It’s true that if you have a poor credit score your options are always going to be limited. But no credit check loans fill a gap in the market. They provide funding to those who wouldn’t otherwise stand a chance of getting a loan. Loans like the payday loan can even provide borrowers with the money they need within 24 hours. However, they’re far more dangerous if you miss out on the repayments because the interest rates are so high.
What Would We Recommend
You can always use no credit check loans if you have a poor credit score and you need the money fast. However, you should always be looking to improve your credit score. Borrowers with better credit scores have access to lower interest rates, larger amounts, and lower repayments.
No credit check loans do exist and they’re an excellent tool if you don’t have a good credit score at your disposal. But you should still be looking to improve your credit score at the same time.