With traditional lenders, reporting payment information to the credit bureaus is a two-way street. But with no credit check lenders? Not so much.
No credit check loans aren’t known for offering lots of fancy perks. They’re a way to get you the cash you need when you need it, ASAP. But are these loans so no-frills that they don’t even end up on your credit report? And is that a good or a bad thing?
How do no credit check loans work?
If you have good credit, you probably easily get a personal loan from a bank, credit union, or another traditional personal lender. But if you have bad credit, your options are going to be more limited.
For one thing, traditional lenders will run a hard credit check when they evaluate your application. And those hard checks will actually ding your score. And while the damage is small and temporary, it’s still the last thing someone with bad credit needs—especially when they’re going to get denied anyway!
That’s where no credit check loans come in. These are smaller loans—both online loans and cash loans from brick and mortar lenders—designed to provide emergency bridge financing for people with bad credit. And just like the name suggests, no credit check loans will not involve a hard check being run on your credit history.
There are three main kinds of no credit check loans. The first is payday loans—sometimes called cash advance loans. These are small-dollar loans with very short repayment terms and extremely high interest rates. A typical two-week payday loan with a 15% interest rate has an APR of almost 400%!
Title loans are also common, but, unlike payday loans, these products are secured by collateral—namely, the title to the borrower’s car or truck. You can generally borrow more money with a title loan than you can with a payday cash advance, but you’ll still encounter APRs averaging around 300%!
Lastly, there are bad credit installment loans, which are structured more like traditional loans. Unlike payday and title loans, which you pay off in a single lump sum, installment loans are paid off in a series of set, regular payments over a period of months or years, not weeks.
How does credit reporting work?
Your credit score is based on information in your credit reports. These are documents that track your history as a user of credit. Generally, the information stays on your credit reports for seven years, but some information sticks around for longer.
You have three different credit reports, one each from the three different credit bureaus: Experian, TransUnion, and Equifax. And those credit bureaus rely on businesses like lenders, landlords, and debt collection companies reporting information to them in the first place.
Some businesses only report to one or two of the credit bureaus, not to all three. This is why information can vary across your reports, and why a credit score created from, say, your Experian report could be higher or lower than a score created from your TransUnion report.
Credit reporting is a two-way street. Businesses that check consumers’ credit scores rely on the credit bureaus to provide them accurate scores and credit histories, while the bureaus rely on these same businesses to report this very same information.
No credit check loans don’t show up on your report.
With no credit check lenders, however, there is no two-way street. In most cases, there isn’t even a one-way street. No credit check lenders don’t rely on the credit bureaus, and they don’t report to them either.
Case closed, right? Actually, no. Not quite yet.
There’s one big exception.
While no credit check lenders don’t report payment information to the credit bureaus, debt collectors most certainly do. And if you end up defaulting on your no credit check loan, the odds that the debt gets sold to a collection agency are pretty good.
If that happens, and the debt collector reports your account to the credit bureaus, your score is going to take a big hit. This is one of the annoying things about no credit check loans: You don’t get the bump from paying one off on time, but you do get dinged for failing to make your payments.
Consider a soft credit check loan instead.
There is an alternative to choosing no credit check loans when you’re in need of some quick cash: You could apply for a bad credit loan that performs a “soft” credit check instead. Unlike hard checks, soft checks don’t end up on your credit report and don’t affect your score.
What’s more, a soft credit check lets you know that the lender is taking your ability to repay into account, making it less likely that you’ll borrow more than you can repay and end up either defaulting entirely or stuck in a dangerous, costly cycle of debt.
Even more than finding a lender who performs a soft credit check, you should focus on a lender that checks your ability to repay—whether that’s a soft check, an income verification, or another type of underwriting process. Anything is preferable to no check at all.
Some of these soft credit check lenders even report your payment information to the credit bureaus! So if you make your payments on time, that information will go on your report and can help you build a better credit history!
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The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.