Loans can provide a way to deal with financially hard times in your life. But they are also a huge responsibility. In order to find out whether you are eligible for a loan, a lending company will normally carry out a credit search. If you have a good score, you are more likely to be approved for loans. But are there any situations where you do not have to have your rating checked?
Let’s take a look at whether loans no credit check exist.
What is a Credit Check?
A credit check, which can be referred to as a credit search, is simply when a lender chooses to look at your personal financial information and credit score. It involves searching for data on your credit report in order to see what your spending habits and behaviors are. A company is only able to make credit checks when they have an appropriate reason. For example, some of the following are included:
- During a loan application
- For gas and electricity
- A new mobile phone contract
- Letting agencies for a new house
- Some employers
Essentially, your credit report is going to reveal previous borrowing habits. Companies will be able to see whether you’ve paid or defaulted on payments and how much credit you currently have.
There are two types of credit searches that can be carried out. This includes a soft and a hard credit check. There is a difference between these two and it is essential that you understand what it is.
Soft Check
A soft credit search is basically an initial look at your financial information. Companies will be able to some of your credit report but it will not be a full examination with all the details. The good thing about a soft credit check is that it doesn’t impact on your credit score. In addition, other companies cannot see who has carried out a soft search. Only you will be able to see this. In addition, when you look at your own credit report, this will be a soft search. So, nobody has to know you were looking.
Hard Check
When a lender or other financial company requests to look at all of your credit report, this is known as a hard check. This is often what happens when you apply for a loan. The lender will perform a credit check to learn about your financial habits before offering you a deal. They are able to see all of the details.
But it is important to realise that too many hard searches can affect your score. It can reduce your score for around 12 months, which is why we advise not to apply for too many loans in a short period of time. It could affect your chances of being approved for one.
Can I Get a Loan Without a Credit Check?
Unfortunately, it is not possible to get a loan without credit check. The Financial Conduct Authority has the duty of regulating loans and they require all companies who provide borrowing to carry out a credit check. Thus, it is the law that your score is seen before you will be granted a short term or long term loan.
Avoid No Credit Check Lenders
If you see any lending companies that offer loans no credit checks, you should be very cautious. This is true even if they have a co uk website address. This may be a sign that they are not a legitimate or legal lender. It is best to avoid applying for a loan with them.
It is normal to be apprehensive about a lender seeing your score. If you have poor credit, it is important to realise that this does not mean you will not get a loan. It may just mean that you pay a higher interest rate. It is still worth applying for. A company may still provide you with options.
Do Payday Loans Even Include a Credit Check?
Everyone assumes that payday loans is a quick way to access extra money when you really need it. Of course, this can be true. They’re designed to be quick loans over one or two months for modest amounts of money. Certainly, you can make your loan application online and once the lender has verified and approved your details, you can access cash quickly.
Checks are the Law
It is important to remember that credit checks are necessary for every type of loan. This includes payday loans. Every FCA authorised lender will need to look at your credit score prior to issuing you with cash. There is no way around this.
Just because you have a poor credit score does not mean you cannot enjoy a short term loan. An affordability test can be carried out by lenders to see whether you could deal with monthly repayments at the current interest rate.
Can I Get an Emergency Loan with Bad Credit?
A lot of people hesitate when it comes to applying for a loan since they think they have bad credit. First of all, it is best to check your rating to see if this is true. You can use a website such as www.experian.co uk or www.equifax.co uk. These companies allow you to conduct a soft search and check what your rating is prior to applying for a loan.
The Affordability Test
If you find you do have a bad rating, it is not the end of the world. People are not automatically rejected by a loan company just because they have poor credit. While your rating is an indication of your borrowing habits, an affordability test can help you secure a loan. This involves a company taking a look at your income and employment to see if you could pay back a loan on time. Therefore, if you earn a good amount of money every month and are in full time employment, you could still enjoy a loan.
The Important Thing to Remember
Just remember that loans with no credit checks do not really exist. While your rating may not be the defining factor in your application, it will still be something that is seen by lending companies.
What Can I Do If I have Poor Credit?
There are ways that you could improve your credit rating over time. But it is essential that you realise that there are no quick fix solutions. It can take several months for you to see a difference with your score.
Popular Ways to Boost Your Score:
- You can make sure that you are on the electoral roll. This is a way to prove your identity.
- Next, only apply to one or two lenders at a time. This prevents excess checks being carried out and lowering your score.
- If you have a loan already, make sure you complete payments in full and on the due date for the duration of the agreement.
- Do not use too much credit. Keep your borrowings low.
- If you see any mistakes on your credit report, have them corrected. This may necessarily bring your score down. No one wants that.
Things to Avoid
- Forgetting to pay bills.
- Applying for too much credit all at once.
- Defaulting on loans you already have.