When you’re shopping for a short term loan, you might see lenders advertising ‘no credit check’ loans. These are loans aimed at people with bad credit, no credit history, and shopper who are worried about their credit score or think going through a credit check will delay their application.
However, strictly speaking, there is no such thing as a ‘no credit check’ loan, because even flexible, short-term loan companies are required by regulators to run a ‘soft’ credit check before lending money.
The kind of credit check these lenders run is less intrusive and in-depth than the checks that banks would run, but in reality, ‘no credit check’ is simply shorthand for a loan with a higher-than-usual acceptance rate.
In the UK, lenders who run no kind of credit check at all are classified as unregulated- meaning their customers have no protection against bad behaviour under the rules laid out by the Financial Conduct Authority.
What Is a Credit Check?
The UK’s credit agencies hold records on anyone who has ever borrowed money, which details their financial situation. When a lender runs a credit check, they contact one of these agencies and request to view your file.
Your credit file contains information about how much debt you have, your income, your address, how often you apply for loans and your track record of paying them back on time.
Using this information, lenders can then make an informed decision about whether they should lend to you at all and if so, the interest rate they should offer you.
The lower your risk to the lender, the better the deals you will be able to access, whereas higher-risk borrowers will face higher interest rates on their borrowing.
Hard v Soft Credit Checks
When a lender looks into your credit file to decide whether or not to lend to you, they can make two different kinds of enquiry:
Hard Credit Check
Hard credit checks give the lender a full picture of your credit history. When a lender runs a hard credit check, it gets listed on your file.
This means that if other lenders run a check on you in future, they will be able to see who you asked to borrow money with in the past, how much you asked to borrow, and whether or not you were accepted.
If a lender sees that you have been rejected by other companies, they may be more hesitant to make you an offer.
Soft Credit Check
A soft credit check gives the lender necessary information about you, such as your name, address and overall credit score. It doesn’t go into detail and doesn’t get listed on your credit file.
Unlike banks, ‘no credit check’ loan companies may make a decision after seeing your soft credit check. Once you have been pre-approved by the lender, they will run a hard credit check as they close the application.
Pre-approved applications are rarely rejected meaning that it is unlikely that the loan would be turned down after running a hard credit check- which would be visible to other lenders in the future.
I Have Bad Credit. Can I Get a Loan Without Doing a Credit Check?
If you have bad credit, this means you have a history of not paying your debts on time. While it is still possible to get a loan with bad credit, you will still need to pass a credit check at some stage.
This is because all regulated and responsible lenders in the UK must run a credit check on their potential customers to make sure that they only lend money to people who can afford to pay it back.
Unfortunately, if you have bad credit, it can be hard to find a lender who will consider the application. To make things worse, having your application rejected after a lender has run a hard credit check on, you can leave more stains on your credit file.
Some lenders have specialized credit cards and loan accounts for people with bad credit. These are often for small amounts of money and have relatively high-interest rates. You may not be able to get pre-approval on these products.
Many short term loan lenders offer pre-approval on their products. If a loan is pre-approved, it means that you are unlikely to be rejected at the ‘hard check’ stage.
Most short term loans are for small amounts of money and have high-interest rates, as well as being repayable over a short period.
How Can Flexy Loans Help?
Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.
They have already helped thousands of people get loans already, and they can do the same for you.
Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you. All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.
To apply and see what loan is available to you, click on the below and answer the questions