There are times when a person need to access external financial help to handle some unavoidable or important financial purposes on time. However, before approving a loan banks, credit unions and online lenders check borrower’s credit history to determine their credit worthiness. 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. It is important for every loan seeker 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 bad credit score.
As lenders don’t know you personally, they stick to outside sources to determine your credit worthiness. That is where credit bureaus such as TransUnion, Expedia and Equifax come into the picture. Credit bureaus have their own formula to calculate your ‘credit score’, turning your credit worthiness 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 credit worthiness 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 fixed amount on monthly basis, you will be able to get approve 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 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 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 credit worthiness includes your bank statement, your employment history, income and your financial background.
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.
There are many people who may try to seek out no credit check financing as they are having 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.
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 these loans are so handy. They serve as a 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 time span 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 these loans. Penalties and late fee charges will be imposed by lenders if in case of payment default or late payment.
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:
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: