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It is quite understandable that some people are reluctant to submit to a credit check. If you have a bad credit history or have made financial mistakes in the past, you may be concerned that a credit check will result in your loan application being denied and your credit rating further damaged. .
The good news is that there are lenders in our panel who specialize in providing bad credit payday loans to those with bad credit. In addition, our application process allows you to check whether a lender is likely to accept your application or not, without harming your credit score. We do this by performing a “soft search” on your credit report. You can read more about credit checks and soft credit searches below.
What is a credit check?
A credit check is a review of financial information held about you by one of the three UK credit reference agencies – Experian, Equifax and Transunion.
This review helps potential lenders see how you have handled credit in the past and gives them an indication of the likelihood of you repaying your loan and therefore the risk you would pose to them if they chose to lend you the requested money. .
It is important to note that there are two different types of credit checks. A soft credit check and a hard credit check – the difference between each of them is explained below.
What Are Strict Credit Checks?
A rigorous credit check is when a lender examines everything on your credit report.
This is the type of check that a finance provider, bank, or mortgage company will use if you apply for credit. They look at almost any type of account you have that you make regular payments to, for example, credit cards, cell phone bills, and mortgages.
They check your credit report to see if you have missed any payments. They can also normally find out what your overall debt level is (i.e. both your unsecured debt and your secured debt such as mortgages).
Firm credit checks stay on your file for 12 months, although some, like debt collection checks, may stay on your file longer. Every business that looks at your file can see who performed these checks and why.
What is a flexible credit check?
A soft credit check is a survey of your credit report to examine certain information on your credit report.
Companies do indirect research to determine the success of your loan application without having to perform a “hard” credit check.
It’s like a background check to get a quick indication.
Indirect searches aren’t visible to other businesses, which means they don’t impact your credit score.
What is a lender looking for?
Information that a lender will typically look at during a credit check includes:
- All loans, credit cards and mortgages that you have currently opened or that you have closed at any time during the past six years
- Any overdrafts on your current bank account
- Details of previous times you missed credit repayments
- Details of previous county court judgments (CCJs)
- Any previous bankruptcy
Together, this information constitutes your “credit history”.
Can I get a loan without a formal UK credit check?
In the UK, no lender should offer a loan without doing a “hard” credit check – this would violate the regulator’s rules. The regulatory environment for short-term funding in the UK has become more stringent in recent years – for example, there are now restrictions on:
- Interest rates a lender may charge
- The number of times a loan can be refinanced
- How much a lender can charge you in fees in the event of a default
Businesses that do not follow the rules can be fined or ordered to compensate customers they may have treated unfairly. In severe cases, the regulator can withdraw a company’s authorization to act as a lender.
If you have a complaint about your lender, you can refer the matter to an independent arbitrator at Financial mediation service. The financial mediator has the power to oblige financial companies to pay compensation to clients whom they have put at a disadvantage.
This strict regulatory environment should reassure you. If you are dealing with a licensed and regulated lender, finance provider or credit broker, you are dealing with a business or organization that is subject to a wide range of rules and guidelines, and that has a legal obligation to deal with you. fairly. always. One of the operational objectives of the regulator, set by law, is “to ensure an appropriate level of protection for consumers”.
However, that doesn’t mean that you can’t get a loan quickly. Technology and data analysis help lenders make a quick decision about affordability and risk when taking out a loan.
Should I Consider a Loan Without a Credit Check?
If you are dealing with a lender who offers a loan without a credit check, you should avoid them at all costs. Any finance provider who suggests they can provide a loan without a credit check is breaking the rules set by the Financial Conduct Authority (FCA) and likely offering to lend money illegally. As a consumer, you will not be protected by the FCA either.
Aren’t Payday Loans For Credit Check Legal?
Lenders should perform some form of credit check before making a decision on applying for credit. Unsecured loans, including payday loans, are regulated by the Financial Conduct Authority (FCA), whose rules state that proper credit checks must be performed on all applicants.
If you are dealing with any person or company that is not authorized or regulated and authorized by the FCA, you should not enter into any form of credit agreement for your own safety.
Aren’t Payday Loans For Credit Check Safe?
NO, as a general rule, a loan is only “safe” if the credit provider is authorized and regulated by the Financial Conduct Authority and you can easily make the required repayments. If you accept a loan without a credit check, it means that no one has done a rigorous assessment to determine if it is likely that you will be able to repay the borrowed money.
No lender should offer you an unsecured loan if they haven’t done a “hard” credit check first, as this would involve breaking FCA rules. If a business indicates that it is ready to give you a loan without a credit check, it may indicate that the business is not actually licensed or regulated by the FCA and is therefore operating illegally.
It is certainly not “safe” to do business with a finance provider that is not authorized and regulated by the Financial Conduct Authority.
Before dealing with a financial services company, you can check if it is licensed and regulated on the Financial Services Register If you choose to do business with an unauthorized, unregulated company, you would have no legal protection if something went wrong. You would also be unable to forward any complaints about this company to the Financial Ombudsman Service.
CashLady is authorized and regulated by the FCA to act as a credit broker. The text that appears at the bottom of every page of our website includes the following statements:
Why is a credit check important?
Credit checks are important because they protect customers from bad credit decisions and avoid unaffordable credit obligations. Credit checks are important for lenders so that they can minimize any risk of bad debt.
The credit check process is used by lenders to determine the level of risk involved in lending money and whether you are likely to be able to make the required repayments and repay on time.
When you apply for a loan, the lender will pay a fee to access your credit report. Records of your personal credit history can be kept by one of the three major credit reference agencies in the UK: Experian, Equifax and Call Credit.
There are generally two steps to checking your credit report. The first is usually an online check to identify you, prevent fraud, and check the level of risk and affordability of the loan. After the initial approval there is a second step before the actual loan which involves a more thorough check where the lender absolutely has to make sure that you can afford your loan. They also want to make sure they can contact you if there are any issues. This is called a “hard” credit check.
The following information is included in a credit check:
- Voters List Information – used as proof of your current and previous addresses
- Loans, credit cards and mortgages that you are currently paying off, as well as debts that you have paid off in the past six years
- Any overdraft in current account
- Details of how often you missed repayments on credit products
- Any previous bankruptcy or county court judgments (CCJs)
- Any details on when your identity may have been stolen for fraudulent purposes
Credit checks also take into account the records of anyone with whom you have a financial connection. For example, if you have a joint account with your partner or someone else and that other person has a bad credit history, it could hurt your own chances of being accepted for a loan. This is because the lender may assume that you are paying the other person’s bills, and this could put additional strain on your own financial affairs.
All of this information is used to determine your “credit score”. This can range from 0 (very bad) to 999 (very good), depending on Experian (but these scores may differ depending on the credit reporting tool you use). Some lenders may automatically reject any candidate who scores below a certain level.
Any “hard” credit check that is performed on you will leave a “fingerprint” meaning that there will be a mark on your credit report indicating that a check has been performed. If numerous checks are carried out on your file within a short period (6 months), this could affect your chances of being accepted.
Can I do a credit check myself before I apply?
You can always contact one of the credit reference agencies to check your credit score. You will be able to do this without negatively affecting your score.