No credit check loans is something that is pitched quite often these days, so it is worth understanding what it actually all means.
The first thing to understand is more often than not, this is just marketing to grab your attention. It would be considered irresponsible lending to provide a loan to a consumer without performing a credit check to ensure the product being applied for is not unsuitable to the consumer.
When a lender is offering no credit check loans, these are usually short term lenders (also known as pay day lenders) who don’t use the credit check as part of their assessment other than ensuring you have no undisclosed liabilities. If you have bad credit, this isn’t an issue for them as they are providing a small amount of money, over a short term, and they are charging such a high interest rate that they are able to offset their risk regardless of what is on your credit file.
If a broker is pitching no credit check loans, usually what this means is that they will do an assessment up front, without performing a credit check in the initial stages, therefore minimising the activity on your credit file and allowing them to provide fairly accurate feedback regarding the strengths and weaknesses in your application and your likelihood of being approved if you were to proceed to a formal application. This is not a bad thing, as it is important to minimise the activity on your credit file to keep your credit score as strong as possible. Every time a formal application for credit is lodged, the credit provider will perform a credit check and that will have an enquiry listed on your credit file. Every time an enquiry is listed on your credit file, your credit score goes down. The more frequently enquiries are listed on your credit file, the more your credit score will be affected. It is due to this fact that most consumers will benefit from enquiring for finance through a broker rather than a lender directly.
When you apply to a bank or finance company directly, they are unable to assess your application without performing a credit check and listing an enquiry on your credit file. Regardless of whether or not you are approved, or even if you are approved and then decide to go with another lender who is offering a better deal, that enquiry will remain on your credit file for 5 years and will have an impact on your credit score from the moment it is listed.
When you apply through a broker however, things are a bit different. A broker is able to assess an application on face value, they are able to compare your circumstances with their broad portfolio of lenders, to give you an honest opinion on whether or not your application will be approved, and which lender will have the best deal for you. Applying through a broker is the best way to ensure you’re getting yourself the best deal, whilst still keeping your credit score as high as possible.