There are times when a person needs to access external financial help to handle some unavoidable or important financial purposes on time. However, before approving loan banks, credit unions and online lenders check borrower’s credit history to determine their creditworthiness. Lenders don’t like lending money to those who are not trustworthy enough with loan repayment.
If you have a record of making payments on time and are not using available credit limit most of the time, you are more likely to be approved for a loan with better interest rates than those with poor credit history. Every loan seeker needs to understand that banks, online lenders and other financial institutions have certain eligibility criteria to grant different types of loans. One of these criteria is the credit score of an individual. This score indicates the individual’s ability to repay a loan. This allows the lenders and creditors to assess whether they should approve you a loan or not. In normal circumstances, lenders have the fear of non-repayment and thus reject the loan application of people with a bad credit score.
As lenders don’t know you personally, they stick to outside sources to determine your creditworthiness. That is where credit bureaus such as Trans Union, Expedia and Equifax come into the picture. Credit bureaus have their own formula to calculate your ‘credit score’, turning your creditworthiness into three-digit numbers. You can check your credit report for free in a year from these three credit agencies. A credit score is a three-digit number that evaluates the creditworthiness of a person, based on his/her credit history. A person’s score ranges from 300 to 850. The higher the score, the more financially trustworthy you considered to be.
Here is when “no credit check” loan comes in. A no credit check loan is a form of debt that doesn’t require any hard credit checking. As long as you are currently working in a reputed working and earning a fixed amount every month, you will be able to get approved for a loan. This kind of borrowing plan is meant for individuals who have a bad credit score or no credit score yet. However, you should be aware of the fact that a no credit check loan can be availed at a comparatively higher rate of interest. Such type of borrowing can be obtained against your credit card limit, with a guarantor vouching for the applicant or against your property.
In general, it has been observed that having a bad credit score is worse than having no credit at all. Having no credit score should not be confused with having a low credit score or a bad credit score. No credit score means that a person has not started building any credit yet. A no credit check loan means that the lender doesn’t perform any credit checking or pull any type of credit report on you before lending you money. Lenders will take the decision of approving you a loan based on your present financial standing and your ability to repay the loan. Other alternative data that lender may consider to determine your creditworthiness include your bank statement, your employment history, income and your financial background.
What is No Credit Check Financing?
No credit check loan may sound good, but it should be considered as your last resort. This can be a good option for those individuals who have blemished credit score and are trying to get back on their feet. Having such type of borrowing can also mean higher interest rates, higher monthly payments and hard credit terms.
Many people may try to seek out no credit check financing as they are having a tough time making ends meet. In the market, you may generally find no credit check unsecured loans given to individuals having bad credit scores or low credit scores. Under this type of borrowing, lenders do not check the credit scores at the time of lending them the loan.
Who Qualifies for a Credit Check Loan?
There are few preconditions that you should be meeting ahead of applying for no credit check financing. This includes:
- Be above 18 years old or more
- Having a regular source of income
- Have permanent UK citizenship
- Hold a valid active bank account in your name for direct fund transfer
What Are The Advantages of Having No Credit Check Loans?
- One can obtain funds without worrying about having a bad or low credit score
- The required funds can be derived in the least possible time with no hectic formalities
- Most of the time no collateral pledging is required
- The loan amount can be freely utilized for the varied number of financial purposes
What Are The Disadvantages of No Credit Check Loans?
- The super high rate of interest (sometimes up to 300% more than the normal rate)
- Higher monthly payments and comparatively shorter repayment term
- Some lenders offer no credit check financing with an asset that can be used as a collateral
How Does No Credit Check Loan Work?
People with poor or low credit score may feel lost and disheartening when they need to access funds immediately. They are available without having any worries about hard credit inquiries and blemished credit score. This is why we are so handy. They serve as the best option to access funds swiftly without the hassle of credit checking and loan rejection.
Such type of borrowing is different from other traditional loans. These loans are generally given for a shorter period and for low principle amounts. The proof of your regular income is the real necessity when applying for these loans. These kinds of loans are not such blessings but a big responsibility instead as you need to pay super-high interest rate attached with no credit check loans. Penalties and late fee charges will be imposed by lenders if in case of payment default or late payment.
What Are The Ways One Can Improve Their Credit Score?
- Having a solid credit score and improving your credit expand your options when it comes to approving for a loan with better rates and terms. Here are some steps that you take into consideration to improve your credit score:
- By paying your bills on time and in full you may able to improve your financial situation. This could help you to avoid late fee charges and interest payments.
- Keep monitoring your credit report and make sure the information is right and accurate. You can ask for a copy of your credit report for free from three credit bureaus. Rectify anything showing incorrectly in your report.
- To build your credit score you must keep your total revolving debt at less than 30% of your total available credit card balance. The more credit balance you use, the more you will be at risk in your lender’s eyes.
- You must keep your old credit cards and loan accounts open as it will help in determining the age of your credit history and your debt utilization ratio. If you choose to close them then it will hurt your credit score even further.
- If you want to improve your credit score then you need to attempt to settle accounts that have already been charged or that have been sent to collections. Contact the lender or collection agency and request them to settle the account for a portion of what you owe. The company may agree to wipe out the charge-off from your credit report.
- Try to open a new secured credit card which can increase the amount of your credit limit and can lower your total credit utilization. Don’t use the new card much, as it is only made to keep your credit utilization ratio as low as possible.
- Keep making well-organized and smart financial decisions if you really want to improve your credit score.
What Are The Alternatives to A No Credit Check Loan?
If you don’t approve for a traditional loan, because of your bad credit score you may seek no credit check financing with a higher rate of interest. But you still do have other options or alternatives to no credit check loan as well. Here are the best options to explore:
- Credit unions where you can get a smaller amount of funds with reasonable interest rates that you can actually afford to repay. Loans from federal credit unions are capped at an 18% maximum interest rate.
- Collateral loans are available if you own something valuable in your name, such as a car. Under such type of borrowing plan, the lender holds the title of the vehicle until the loan is repaid.
- Many lenders offer personal loans to the people with a credit score below 600. A soft inquiry will be made on your credit report which won’t hurt your credit score.
- A family member or friend with a good credit history willing to cosign your loan can be a plus point and can help you avoid high-interest rate no credit check financing. It is important to make a strategy to pay off a loan if your loved one has trusted you enough to cosign for you. Cosigning would help you to qualify for a loan and get a reasonable interest rate.
- Take a cash advance against your credit card. It can be costly but typically less expensive than the cost of a payday loan.