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When your credit check is bad or if you have not built any credit history at all, qualifying for a loan is always going to be an issue. Lenders would prefer if their borrowers can prove that they’re reliable and can manage their debts well. If you’ve borrowed in the past and you’ve missed payments, expect that it’s going to reflect on your credit rating.
Mandatory credit checks
Naturally, you’d prefer if you can find a lender that will not perform a credit check when you apply for a loan. However, in the UK, it is illegal for lenders to offer their services to borrowers without performing a credit check. If you’re going to borrow money from traditional banks, you’re most likely going to be turned down. So, the most ideal option for you might be to consider the less traditional ones.
Consider payday loans
When you refer to standard lenders and major banks, they will perform a hard credit check on your profile and will find that your credit score is not up to par. Worse, since this is a hard inquiry, it’s going to pull your credit score even lower. One option for you is to refer to payday lenders. Known for offering short-term loans with quick processing time, they can be ideal for borrowers that do not have the perfect score.
While they perform a credit check on every loan application, they only perform a soft one which means that it won’t affect your credit record adversely. They are also more concerned about your ability to pay the debt back. So, if you can offer proof that you are earning a regular income and you have met all their other basic loan eligibility requirements, you can take out a loan.
Beware of high costs
There is a downside though, being that payday loans tend to get charged really high interest rates. This is also why if you can, only consider these loans after you have checked other available alternatives to avoid getting charged a hefty fee.
How To Apply for No Credit Check Loans
The financial status of many people nowadays is that they have a low income, weak credit, and little to no savings. So when an emergency happens-like an unexpected medical situation or auto-repairs, your options are limited. And in that case, a loan might be necessary. But with having weak credit, your options are limited, and how do you make it so you don’t mess your credit up even more?
But what if you don’t even a credit? What does having no credit mean? Every person has a credit score. The most common scoring system used is the FICO system which rates as following
750 to 850 (Excellent)
660 to 749 (Good)
620 to 659 (Fair)
350 to 619 (Poor)
Having no credit score usually means that you never established a credit history. This makes Lenders have a hard time gauging the risk in lending you money.
How can someone have no credit? If that someone has never borrowed money from a bank or a union, never had a credit card or never had any utility bills, they’re basically off the credit grid. There are no problems with this other than when in times of emergencies and you need to get a loan, things might get complicated.
Why does checking credit important? A lot of information about the borrower can be taken from credit score alone. From how often the borrower applies for a loan to how like he/she will pay on time. Many lenders conduct this thing called a “hard credit inquiry” to determine how risky it is to lend money to the borrower.
But be wary, when you get hard checked, your credit score takes a hit, and if you’ve been hit by a hard inquiry after another, that usually means that you are desperate for money and it may look like you’re mismanaging the money by the lender's eyes.
So what are your options when getting a loan with no credit?
There is a thing called No Credit Check Loans. But be very careful, when a lender offers you a no credit check loan, it usually means it has pretty high-interest rates and short term amounts. Most lenders who offer this kind of loans are predatory lenders. Their goal is to trap you into a cycle of debt, in which they keep offering you to extend the loan causing you to keep on paying and paying and paying the fees without reducing the principal loan.