Have you noticed that it’s one of the ways that most advertising has? A bold statement to build up the product or service being sold that is at the same time both true and not quite true.
That’s probably the way it is with so-called no credit check instant payday loans. It’s more or less true that there’s no credit check on your ability to repay the loan, yet at the same time, there is strictly speaking no such thing as a no credit check loan.
So, what’s the real answer – do they, or do they not exist?
A credit check offers lenders a way of assessing whether applicants are likely to be able to afford the loan requested and if they are likely to make the agreed repayments without defaulting.
That’s done with reference to your credit history of the way you have managed your borrowing in the past, the extent to which you have made repayments on time or whether there are recorded difficulties – as evidenced by your having been declared bankrupt, have had country court judgments (CCJs) mas against you, have entered any Individual Voluntary Arrangement (IVA) with creditors or have needed to make a Debt Management Plan.
Lenders not only choose to conduct credit checks (to safeguard their own interests) but are obliged to do so, in the interests of responsible lending to customers, under the terms of the authorisation and regulation to which lenders are subject by the Financial Conduct Authority (FCA).
Under these strict rules, therefore, there is no such thing as a no credit check loan.
No credit checking
On the contrary, insist many providers of instant payday loans. They make a decision about whether or not you qualify for such a loan based only on the information you provide in your application – a “snapshot”, if you like, of your current financial standing, but without any formal check with the credit reference agencies.
This is a process known as a “soft search” or “quotation search” which leaves no trace on your credit history file.
This is an important consideration since every application you make for credit is noted on your credit file. If the application is rejected, this too is noted and is likely to have a negative impact on your overall credit “score” and subsequent ability to secure credit or a loan.
By pre-checking your likely ability to be approved for a loan when you make a formal application, therefore, this represents what might properly be called a no credit check instant payday loan.
No credit check/credit check
In this way, both answers might be seen as correct. The soft search or quotation search done by the provider of a payday loan avoids the need for a formal credit check – it is a no credit check solution. When you finally make your application for the loan, however, any lender is obliged to conduct a credit check on the file held on you by the credit reference agencies.