No Credit Check Loan

No Credit Check Loan
A no credit check loan is a type of loan in which a lender evaluates your creditworthiness without using a credit report.

What is a No Credit Check Loan?

A no credit check loan is a type of loan in which a lender doesn’t conduct a credit check. With a hard credit check, the lender reviews your credit report and credit score. Too many hard credit checks can lower your credit score, as they indicate that you’re applying for lots of loans and might have money problems.

With a no credit check loan, the lender doesn’t conduct a formal review of your credit report.

With a no credit check loan, the lender doesn’t conduct a formal review of your credit report. With a no credit check loan, the lender conducts no credit check whatsoever. This form of no credit check loan is common among payday lenders, who provide loans to customers they know are unlikely to make payments on time. Payday lenders profit when you fall behind on payments because it allows them to charge additional interest and fees.1

Are No Credit Check Loans safe?

The answer, in general, is usually no. Lenders who process loan applications with no credit check used in their application process are notorious for predatory practices.

Always do your research to find a safe and reputable lender. Also, be sure to comparison shop to find the lowest APR and best payment terms.

Is a No Credit Check Loan from a payday lender safe?

Never.

Predatory lenders—like payday and title lenders—offer no credit check loans that operate very differently than traditional loans.

Payday lenders profit when you miss payments. They get to charge additional fees and interest, so it’s in their interest to lend to customers who won’t make payments on time. When they offer you a loan without a credit check, they know there’s a chance you might have difficulty making payments. But this is an opportunity for them to make money, even if it has terrible consequences for you.

Why do lenders conduct credit checks?

Credit checks allow lenders to determine your creditworthiness. They’re considered a useful tool in predicting the likelihood that you’ll have the ability to repay a loan. Lenders use them to decide whether to grant or deny your application, and they help them make sure that they don’t offer loans to someone who can’t repay them.2

While useful for lenders, credit checks can be seen as an important protection for borrowers too. They help ensure that you don’t receive a loan that you’re unlikely to repay. While a credit check may mean that you don’t receive a loan if you have bad credit, a denial is likely better than receiving a loan that you can’t afford and traps you in a cycle of debt.

What are the benefits of a No Credit Check Loan?

One benefit of no credit check loans is that your credit score won’t be damaged by a hard credit check. Another benefit is that they make it easier to qualify for a loan if you have bad credit. When you apply for a no credit check loan, the lender doesn’t look at your credit report or credit score, so if your score is low, the lender won’t see it.

What is a payday loan?

A payday loan is a type of no credit check loan that’s linked to predatory practices. The typical payment term for a payday loan is two weeks, and if you don’t pay back the full amount of the loan with fees and interest in that time, you’ll be forced to pay a fee to “rollover” the loan and extend it. This can easily trap you in a cycle of debt, as you continually extend the loan without ever actually paying it off fully.

What is a title loan?

A title loan is another common no credit check loan that has been linked to predatory practices. With a title loan, you offer your car as collateral. If you default, the lender can seize your vehicle and sell it to make up the money you owe.

Given that there’s a good chance that your car is necessary for transportation, title loans are rarely worth the risk. Like payday loans, they have short payment terms and extremely high interest rates, so it’s easy to fall behind. One study found that as many as one in five title loan borrowers lose their car.3

Bottom Line

While no credit check loans are a way for borrowers with bad credit to get much-needed cash, a quick influx of money isn’t worth it if it traps you in a cycle of debt. Payday and title lenders—who have been linked to predatory practices—offer no credit check loans because they stand to profit if you have trouble repaying them. When considering a loan, look for a lender who conducts a soft credit check with an alternative credit reporting agency. There are safe and socially responsible lenders who can offer the money you need now—and want to make sure you can actually afford your repayments.

Works cited:

1 Lee, Jenna. “The Difference Between Hard and Soft Credit Inquiries.” Money.USNews.com, 24 July 2014, http://money.usnews.com/money/blogs/my-money/2014/07/24/the-difference-between-hard-and-soft-credit-inquiries. Accessed 7 April 2017.

2 “Legal Credit Reports—Who Can Access Your Credit History.” CreditInfoCenter.com, 18 Feb. 2016, http://www.creditinfocenter.com/creditreports/legally-pull-credit-reports.shtml. Accessed 7 April 2017.

3 Sullivan, Bob. “1 in 5 Title Loan Borrowers Lose Their Car, Report Finds.” Credit.com, 18 May 2016, http://blog.credit.com/2016/05/1-in-5-auto-title-loan-borrowers-have-their-vehicle-seized-144700/. Accessed 3 April 2017.

Soft Credit Check

Soft Credit Check
A soft credit check—also known a soft inquiry or soft pull – is a way to obtain information from a person’s credit report without impacting their credit score. Unlike hard inquiries, which are recorded on your credit report and can negatively affect your score, soft inquiries do not require an individual’s authorization before they can be run.

What is a Soft Credit Check?

A Soft credit check is one of two kinds of credit checks, the other being a hard credit check. These are also sometimes referred to as “credit inquiries” or “credit pulls.”

What is a credit check?

A credit check is an action wherein a person or institution checks a person’s credit history and credit score in order to assess their creditworthiness. Credit checks are routine when applying for a loan or line of credit, and their creditworthiness could determine whether or not they are approved for the loan and what kind of credit they can get. However, credit checks can also be run other situations, such as when a person is applying for a job or an apartment.

What is difference between a hard credit check and a Soft Credit Check?

A hard credit check allows the person or institution making the inquiry to view a full copy of a person’s credit report. On the other hand, a soft credit check will only return a basic overview of a person’s credit report.

Soft inquiries also don’t require the authorization of the person who’s credit history is being pulled, whereas hard inquiries do require authorization. Because soft credit inquiries can be run without this authorization, they are run far more frequently than hard inquiries.[1]

A common situation where a soft credit inquiry might be run is when a credit card company is sending out pre-approved credit card offers. They will run a soft check to make sure that a person might qualify for their product before extending an offer to them. Soft credit inquiries can be run on a person’s credit history without them ever knowing.[2]

Is a Soft Credit Check recorded on my credit report?

The short answer is “no.” But it’s not quite that simple.

Soft credit checks are recorded on a person’s credit report. However, they are only viewable when the owner of said credit report requests a copy. If another party, such as a lender or a landlord submits a hard inquiry on your credit history, they will not be able to view your soft inquiries.

Hard inquiries are recorded on a person’s credit report and can be viewed by anyone who views said report.

Does a Soft Credit Check affect my credit score?

No. A soft inquiry will never affect your credit score.

This is one of the main ways in which soft credit checks are different from hard checks. Since hard credit inquiries are most often run when a person is applying is applying for a loan, they are seen as requests for more credit. Too many requests for new credit within a short period of time can be seen as a sign that person is not handling their current credit load responsibly. As such, the hard inquiry causes their credit score to go down.

According to experts at FICO, a borrower with six or more hard credit inquiries on their report is up to eight times more likely to file for bankruptcy than someone with no inquiries.[3] According to those same experts, a hard inquiry can cause a decrease in your credit score of up to five points.[4]

The one exception for hard credit inquiries is when a person is applying for a mortgage, auto, student loan and is shopping around for the best rates. In situations like these, the credit bureaus will bundle all these inquiries together so that they only count as a single inquiry.

In what situations will a Soft Credit Check be run?

A soft credit check will be run when you are applying for an apartment or job, or when a credit card company is deciding whether or not to send you a pre-approved credit card offer. A soft inquiry will also be run if you check your credit score through a website like CreditKarma.com or CreditSesame.com.[5]

Hard credit checks are usually run when you are applying for a loan, line of credit, or credit card. They can also be run as a part of some rental applications.

What are a credit report and credit score?

A credit report is a document that compiles a person’s credit history. Credit reports are created by the three main credit bureaus—Experian, TransUnion, and Equifax—and generally go back seven years. These reports contain information on what kinds of credit a person has used, how much they have owed, their history of on-time payments, their history of hard credit inquiries, whether or not they have ever filed for bankruptcy, etc. They are compiled using information from lenders, debt collectors, landlords, utilities companies, and the public record.

Under the Fair Credit Reporting Act (FCRA), you are entitled to request one free copy of your credit report per year from each of the three credit bureaus. Since credit reports can and do contain errors, it is a good idea to check your credit report regularly.  To receive a free copy of your credit report, go to www.annualcreditreport.com. To dispute an error on your report, consult this helpful guide from the Federal Trade Commission (FTC).

A credit score is a numerical grade that’s based on the information in a person’s credit report and expresses that person’s overall creditworthiness. The most common type of credit score is the FICO score (created and owned by the FICO company). FICO scores are expressed on a scale from 300 to 850; 850 is the best possible score and 300 is the worst.

References:

  1. “Soft Inquiry.” Investopedia. Accessed December 2, 2016 from http://www.investopedia.com/terms/s/soft-inquiry.asp?lgl=no-infinite
  2. “Hard Inquiries and Soft Inquiries.” Credit Karma. Retrieved December 2, 2016 from https://www.creditkarma.com/article/hard_inquiries_and_soft_inquiries
  3. “The Difference Between Hard and Soft Credit Inquiries” TransUnion.com. Accessed December 2, 2016 from http://blog.transunion.com/the-difference-between-hard-and-soft-credit-inquiries/
  4. “What are inquiries and how do they affect my FICO score?” MyFico.com. Accessed December 2, 2016 from http://www.myfico.com/crediteducation/questions/inquiry-credit-score.aspx
  5. Lee, J. “The Difference Between Hard and Soft Credit Inquiries.” U.S. News and World Report. Accessed December 2, 2016 from http://money.usnews.com/money/blogs/my-money/2014/07/24/the-difference-between-hard-and-soft-credit-inquiries

Good Money Habits for Single Parents with the creator of “Distilled Dollar”: Part II

good-money-habits

Matt is a licensed CPA and founder of Distilled Dollar where he shares how he and his fiancée went from living paycheck-to-paycheck to building wealth. With his fiancée’s help, he’s distilling down $$$ topics in pursuit of financial independence by the age of 35.

Matt, do you recommend any specific apps or budgeting tools that could simplify the process of budgeting?

As I mentioned previously, Mint.com is great for tracking your spending, and it’s free. Use this to gain that honest clarity. You may be shocked to see where your paycheck is going.

Another one I use is CreditKarma.com. It’s free and they provide a rough estimate of what your three-digit credit score is. This is helpful for knowing if you’ll qualify for an auto loan or mortgage. What really earned them points in my book is I noticed my credit score drastically went down in one month. I learned there was a fraudulent $2,500 charge on my credit card, which was promptly removed. Thanks to online tools like Mint or Credit Karma, I was able to stay ahead of the game.

Are there any assistance programs available that can help with monthly expenses like rent, groceries, or bill payments?

See if there is a VITA or Ladder Up event near you. These are entirely free services for people low incomes (last I checked it was anything below $50,000). There are plenty of extremely qualified people there who are friendly and nice.

Having helped both organizations, I can tell you it is extremely rewarding to give and receive help. I love putting a smile on someone’s face when they learn they qualify for an extra few hundred bucks on their tax return. I recommend checking out either group.

What’s the best way for a single parent to prepare for the holiday season?

My number one tip is to treat each day as its own monthly budget. What I mean is that, with the holiday season, we’re no doubt going to find ourselves spending more than we originally anticipated. By viewing each day as its own month, we can effectively tackle and string together multiple successful budgets without feeling too bad about those slip ups.

As the holiday season comes to a close, I’d encourage anyone who isn’t currently saving to start a new savings habit in 2017. You can start small by saving one percent as mentioned above and building up, or you can save $1 on your first paycheck, then $2 on your second, $3 on your third, etc. If you slowly build up your ability to save, then you won’t feel as many growing pains in your lifestyle.

Any final advice for single parents (or anyone) looking to improve their financial life??

If you’ve felt the struggle of not making ends meet before, then you might be lucky since you’re extremely motivated to never go back to it. For me, the motivation to be financially independent was sparked during the Great Recession. I was broke, and my parents were essentially unemployed.

Moving forward, start small and save for that rainy day. Go a step further and make that rainy day fund mean something more, such as a college education fund. Let your savings transition from sacrifice into small pieces, buying your future freedom.

Thanks, Matt!

Hard Credit Check

Hard Credit Check
A hard credit check—also known as a “hard credit inquiry” or “hard pull”—is a type of credit check used to determine creditworthiness. Unlike soft credit checks, hard credit checks can lower your credit score.

What is a Hard Credit Check?

There are two types of credit checks: hard and soft. Both are ways that lenders—as well as landlords, phone carriers, and credit card companies, among others—determine your creditworthiness.

With a hard credit check, the company conducting the check will first need your permission to access your credit report. (Typically, you provide permission at the same time that you apply for their service or product.) Your credit report contains a range of financial information that includes your loan payment history and whether you have any outstanding balances. Based on this information, the company decides how likely they think you are to make payments on time.

What’s the difference between a Hard Credit Check and a soft credit check?

There are two important differences between hard and soft credit checks:

  1. Hard credit checks require your permission, while soft credit checks don’t.
  2. Hard credit checks affect your credit score, while soft credit checks don’t.

By law, companies can view your credit report for a number of different reasons without your permission. (For instance, a credit card company might conduct a soft credit check to offer you a pre-approved card.) These inquiries are recorded on your credit report but don’t affect your credit score.

Hard credit checks, on the other hand, require your permission and can affect your credit score.

When are Hard Credit Checks performed?

Hard credit checks are almost always conducted for loans and credit cards. Sometimes they’re also conducted for apartment rentals, cell phone contracts, or opening a bank account.1 In all cases, you must first provide permission before a company can conduct a hard check on your credit history.

Why does a Hard Credit Check affect my credit score?

Your credit score essentially represents how likely you’re considered to be to make payments on time. If you apply for a lot of loans—and thus have a lot of hard credit checks on your credit report—it might be seen as an indication that you’re in poor financial health.

How many points does a Hard Credit Check take from my score?

The impact of a hard credit check varies from person to person. For most, a hard credit check will cause a loss of no more than five points. However, if you have a short credit history or lots of hard checks, it might drop by more.2

On the other hand, if you happen to be shopping around for the best offers on a mortgage or auto loan, the credit bureaus may combine several hard credit checks into one. Usually they do this for all similar hard credit checks conducted in a 45-day window. This allows you to finish rate-shopping with minimal impact to your score.3

How long will a Hard Credit Check be recorded on my credit report?

Hard credit checks can stay on your credit report for up to two years.4

References:

  1. Credit Karma. (2016, October 19). Hard inquiries and soft inquiries. Retrieved from https://www.creditkarma.com/article/hard_inquiries_and_soft_inquiries.
  2. Lee, Jenna. (2014, July 24). The difference between hard and soft credit inquiries. U.S. News Money. Retrieved from http://money.usnews.com/money/blogs/my-money/2014/07/24/the-difference-between-hard-and-soft-credit-inquiries.
  3. TransUnion. (2015, December 14). The difference between hard and soft credit inquiries. Retrieved from https://www.transunion.com/blog/credit-advice/the-difference-between-hard-and-soft-credit-inquiries

OppLoans Q&A with Ashley Stetts, The Frugal Model: Part I

personal-loans-blog

Ashley Stetts is a working model and creator of The Frugal Model, bringing you tips for saving, investing and living your best life on a respectable budget. In 2015, Ashley also founded her own modeling agency, Stetts Management, a boutique firm that represents fitting models of all sizes.

Hi Ashley, Thanks so much for talking with us! To start things off, have you always been a frugal person, or was that something you needed to learn later in life?

I was raised by a single dad who was VERY frugal. He definitely taught me to value every dollar and to do whatever it took to save money. I knew that if I wanted to go to college I would need to pay for it myself, so that was a motivator to watch my money and create good spending habits that stuck with me through life.

What made you decide to start writing about personal finance?

Young people are so uneducated about the basics of saving money, especially since it isn’t something that we’re taught in school. I had friends who had no idea about credit card interest rates and who had never once checked their credit scores. Living in NYC and modeling, I knew that I had a platform to speak about personal finance from the perspective of a young person who still needed to keep up appearances and live in one of the most expensive cities in the world. I figured if I could also infuse some humor and personality into my posts, it would be easier to understand and more relatable.

What has living in New York City taught you about better managing your finances?

NYC is one of the best places in the world to live when you’re in your 20’s, but that’s also the time that you need to be saving the most. I quickly learned the ways to buy designer clothes for cheap (used on eBay), how to experience fun events at a discount (Groupon), and how to save money on all of my monthly bills (call and negotiate!). I cover all of these things on the site—they saved me big time and still allowed me to experience all NYC had to offer.

You’ve worked as a freelancer. What are some of the unique challenges of freelance employment, and what advice do you have for other people seeking to work freelance?

As a freelancer, you never know when your next paycheck is coming in. You have to be even more careful with your money so that, when you have long breaks between jobs, you have enough in the bank to pay the bills. To anyone who is considering leaving their 9-5 job to pursue a passion project or work freelance, I would definitely make sure that you have some money saved! Be sure to have your finances in proper order with an emergency fund before you take the leap, because it can be a scary place.

How can people balance the need to live frugally and responsibly with the need for self-care?

Taking care of yourself is something that you always need to make time for. This doesn’t have to mean spa days or big vacations when you’re feeling burned out. So many people tend to use spending money as a way to feel better. I can attest to the power of taking ten minutes every morning to meditate and of deep breathing when you start to feel stressed. Meeting a friend for a run or a workout is always better than heading out shopping (that will just stress you out more if money is tight!).

What should people do to find the best deals and savings both online and IRL?

I always, always look online before I buy almost anything, since you can usually find it cheaper. As I mentioned, things like designer clothes, shoes, and handbags are a steal pre-owned on eBay. Social coupon sites like Groupon are great for buying things like cooking classes, even visits to the dentist (and I still have all my teeth!). I also always check for promo codes before I check out online … there’s usually always something like “20% off your first order” or “free shipping” out there. I also live by the rule “don’t ask, don’t get.” It’s always worth asking if someone can give you a better price.

You’ve written before about how to travel on a budget. What are some of your best suggestions for people who want to go on vacation while staying within their means?

Travel in the off season! Also, book flights for off days. Don’t travel on Friday and return on Sunday – book leaving Thursday or returning Monday. Also, checking other surrounding airports can save money. And I’m a huge fan of Airbnb instead of hotels.

For more of Ashley’s financial tips, check out www.TheFrugalModel.com.

She’s on Twitter as @thefrugalmodel, and on Instagram as @astetts.

Is Checking your Credit Score Bad?

no-credit-check

Short answer? No.

Slightly longer answer? It depends.

For the complete answer, keep reading…

There are two types of Credit Inquiries: Hard Inquiries and Soft Inquiries

And when it comes to how they affect your credit score, they’re pretty much night and day.

Hard Inquiries

Hard inquiries happen whenever you are applying for new credit, like a mortgage, credit card, or personal loan. They usually require that your authorization before the lender can pull your credit history.

Hard Inquiries are recorded on your credit report and will stay on that report for two years. Since a hard credit inquiry is an indication that you are looking for a loan, the inquiry can have a negative effect on your credit score for up to a year.

Why is that? Well, according to experts at FICO, a borrower with six or more hard credit inquiries on their report is up to eight times more likely to file for bankruptcy than someone with no inquiries.[1] Those same experts also say that a typical hard inquiry can knock up to five points off your credit score.[2]

There is an exception, however, and it’s when you have several inquiries within the same 45-day period. Since it is typical (and a good idea!) for people to “rate shop” when applying for a mortgage, auto, or student loan, the credit bureaus will bundle all these separate inquiries together. You’ll still get dinged for the hard inquiry, but you’ll only get dinged once.

A typical hard inquiry can knock up to five points off your credit score.

Soft Inquiries

There are several different situations under which a soft credit inquiry might occur. Some of the most common include looking for a new apartment, getting hired for a new job, and checking your own credit score.

Basically, soft inquiries are when anyone other than a lender is looking at your credit score. Many credit card companies will run a soft inquiry before sending you a “pre-approved” credit card offer.[3]

The great thing about soft inquiries is that they do not affect your credit score. While soft inquiries are indeed recorded on your credit report, they are only visible to you. If a lender pulls a copy of your credit report, they will only be able to view your hard inquiries. So while soft inquiries do end up on your report, it’s basically as a technicality.

If you have bad credit and are worried that applying for a loan that could hurt your credit score, there are certain kinds of lenders (including OppLoans) that will only run a soft credit check while reviewing your application. Even if you apply and get turned down, it won’t affect your credit.

P.S. Did you know that you can request a free copy of your credit report?

It’s true! We swear!

In fact, it’s the law. Under the Fair Credit Reporting Act (FCRA), every person is legally entitled to receive one free copy of their credit report per year from each of the three major credit bureaus — TransUnion, Experian, and Equifax.[4] For those keeping score, that’s three free credit reports per year.

But first you have to ask. To get a free copy of your credit report, just visit www.annualcreditreport.com. If you find an error on your report, just follow this helpful guide from the Federal Trade Commission (FTC).

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

References:

  1. “The Difference Between Hard and Soft Credit Inquiries” TransUnion.com. Accessed November 11, 2016 from http://blog.transunion.com/the-difference-between-hard-and-soft-credit-inquiries/
  2. “What are inquiries and how do they affect my FICO score?” MyFico.com. Accessed November 11, 2016 from http://www.myfico.com/crediteducation/questions/inquiry-credit-score.aspx
  3. “Hard Inquiries and Soft Inquiries.” Credit Karma. Retrieved November 10, 2016 from https://www.creditkarma.com/article/hard_inquiries_and_soft_inquiries
  4. “Free Credit Reports.” Federal Trade Commission. Accessed November 19, 2016 from https://www.consumer.ftc.gov/articles/0155-free-credit-reports

What Does a “No Credit Check” Loan Really Mean?

What Does a No Credit Check Loan Really Mean?

If you have bad credit, getting a safe, responsible loan can feel impossible. After all, any legit lender is going to run a credit check. And once they see your score, they’ll just turn you down flat, right?

Wrong.

There are lenders out there who run credit checks but still lend to people with bad credit.

(We know, because we’re one of them.)

To explain how this works, we’ve gotta get some stuff out of the way first. Namely, we need to talk about the difference between hard credit checks and soft credit checks.

Hard credit checks

A hard credit check means pulling a full copy of your credit history.

Most often, a hard credit check occurs when a person is applying for new credit. Many lenders see too many hard checks as a sign that a person is desperate for credit, which makes the lenders less likely to lend to them. In fact, running a hard credit check can actually lower your credit score by up to five points!

According to the experts at FICO, a person with six hard credit checks within a one-year span is eight times as likely to file for bankruptcy than someone with no hard checks.[1]

Soft credit checks

A soft credit check returns much less data than a hard check. Instead of a person’s full credit report, it gives them a brief overview.

While hard credit checks have to be authorized, soft credit checks don’t. You know those pre-approved credit card offers you get in the mail? Those lenders likely ran a soft check on you before sending you the offer.

The great thing about soft credit checks is that they don’t show up on your credit report. Or rather, they don’t show up when other people look at your credit report. If you request a copy of your report, you’ll be able to see your history of soft credit checks, but other parties who look at your credit will not.

For all intents and purposes, soft credit checks do not show up on your credit history—and they definitely do not affect your credit score.

Okeedoke. Now that we’ve got that out of the way…

What are no credit check lenders?

Next time you see an ad for a “no credit check lender” just go ahead and replace the words “no credit check” with “payday” because they are usually one and the same.

The reason that payday lenders don’t check their customers’ credit is because they don’t care if their customers can’t pay their loans back.

Actually, you know what? Scratch that. They are actively counting on their customers not being able to pay their loans back on time. The more customers that can’t afford their loans, the more loans the payday lender gets to rollover.

What’s loan rollover?

It’s the worst. Really.

Loan rollover is a process in which payday lenders offer their customer an extension on the due date of their loan. It sounds nice at first, but it’s really just a chance for the lender to charge the borrower additional interest for borrowing the same amount of money.

Here’s an example:

You take out a $300 payday loan that costs $15 per $100 borrowed. The loan is due in 14 days, and you will owe $345 (The $300 that you borrowed + $45 in interest).

But when that 14 days is up, you find that you don’t have $345 to spare. So you roll the loan over. You only pay the $45 that’s due in interest, and you get another 14 days to pay back the $345 you still owe.

See what happened there? You pay the lender the $45 in interest, and then they charge you an additional $45 for the two-week extension. A loan that cost you $15 per $100 borrowed now costs you $30 per $100.

Measured as an annual percentage rate (APR), the true cost of this loan is pretty staggering: 390 percent. If you had that loan outstanding over a full year, you would pay almost four times what you borrowed in interest alone.

The real problem with no credit check loans

Now, a 390 percent APR might not seem to matter so much for a loan that’s only two weeks long, but that’s precisely why rollover is so sneaky and awful: the more you roll the loan over, the more expensive your loan becomes (read more in The Truth About No Credit Check Loans).

That’s why payday lenders don’t run a credit check on their potential customers. Whereas most lenders are concerned about whether their customers can afford to repay their loans, payday lenders are the exact opposite: They are hoping their customers can’t repay.

Don’t believe us? Well how about this:

According to the Consumer Financial Protection Bureau (CFPB), over 80 percent of payday loans are the result of rollover or reborrowing.[2] Basically, if payday loan customers could actually afford to pay their loans on time, the industry would go kaput.

Not. Great.

What about soft credit check loans?

Both “no credit check” and “soft credit check” lenders lend to people with bad credit, the kinds of folks who most traditional lenders would turn down. The big difference between the two is that “soft credit check” lenders genuinely care about whether or not you can repay the loan they’re offering.

That’s why soft credit check lenders check your credit before extending you an offer. They want to make sure it’s a loan you can actually afford. Unlike no credit check lenders, they don’t plan on rolling over your loan again and again and again. They intend to give you a loan that you can pay off the first time.

But that’s not the only difference. While payday lenders offer you short-term loans that you have to repay all at once (something that few borrowers can actually afford to do), soft credit check lenders usually offer long-term installment loans. These loans are designed to be paid off a little bit at a time, with equally sized, regularly scheduled payments.

And many times these loans are amortizing, which means that (long story short) you can save money by paying the loan off early, something you can’t do with payday loans.

You deserve better than a payday loan

At OppLoans, we run soft credit checks on all our applications because we care about our customers’ ability to repay the loans we’re offering. Plus, our loans are up to 125 percent cheaper than your typical payday loan. Applying for a loan won’t cause your credit score to go down, and you’ll be in much better, more responsible hands than you would with a payday lender.

References:

  1. “What are inquiries and how do they affect my FICO score?” MyFico.com. Accessed November 14, 2016 from http://www.myfico.com/crediteducation/questions/inquiry-credit-score.aspx.
  2. Burke, K., Lanning, J., Leary, J., Wang, J. “CFPB Data Point: Payday Lending.” Consumer Financial Protection Bureau. Accessed November 14, 2016 from http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf.

5 Must-Know’s Before Applying for a “No Credit Check” Loan

Picture this: You’re standing in front of your car, staring down at a brand new (and totally mysterious) dent in your door. Hit and run? Aggressive stray shopping cart? Who know?

What you do know is this is going to cost you money—money that you do not have on hand.

You used to have a $1,000 emergency fund, but that got eaten up when your boiler decided to die in the middle of January.

You’re going to need to take out a loan to pay for the repairs. There’s no way around it.

Oh, and here’s the kicker: Your credit score is only 590.

That means a traditional bank loan is out, as are most personal loans offered by online lenders. Those lenders will check your credit and could give you the boot pretty much immediately.

It looks like you’re going to need a no credit check loan.

But before you sign that loan agreement, here are five things you need to know …

1. Stay away from payday and title loans

For real. If you have bad credit and need a fast cash loan, taking out a payday or title loan is pretty much the last thing you should do.

Both payday and title loans are short-term loans that come with interest rates around 15 to 25 percent. But those rates can be seriously misleading. When measured as an annual percentage rate (APR), payday loans have an average rate around 390 percent, while title loans have an APR of 300 percent.

What that means is they’re really, really expensive.

In addition to those high rates, these predatory loans are designed to be paid off in a single lump sum, which can be hard to do for many borrowers, which is why they will usually roll the loan over. Every time they do that, they increase the cost of their loan. That’s how a 15 percent interest rate can turn into a 390 percent APR! You can learn more in the article The High Cost of Payday Loans.

Sometimes, a no credit check loan is necessary—but steering clear of payday and title loans is always a must.

2. Make sure the lender checks your ability to repay.

This is something that a lot of payday and title lenders don’t do. That’s one of the reasons those loans are so dangerous.

With a traditional unsecured personal loan, the lender will lose money if you can’t pay your loan back. That’s why they always check to make sure that you can afford your loan.

But did you know that many no credit check lenders actually count on their customers not paying their loans back on time?

With predatory payday and title loans, borrowers who can’t afford their loans are more likely to roll the loan over and incur additional interest. Every time the loan rolls over, it becomes more and more profitable for the lender. Combine loan rollover with interest rates north of 300 percent, and you have a recipe for financial disaster.

Lenders that don’t confirm your ability to repay the loan are probably taking you for a ride. Do yourself a favor and just steer clear of them.

3. If possible, find a lender that does soft credit inquires

Just because a lender checks your credit score, that doesn’t mean they’re going to turn you down. And if they’re only running a soft inquiry on your credit, then applying for the loan won’t show up on your credit report.

There are two kinds of credit inquires: hard inquiries and soft inquiries. Hard inquiries return a lot more detailed information to the requester, but they also get recorded on your credit report. Too many recent inquiries can hurt your credit score, as it looks like you are desperate for a loan.[1]

Soft inquiries, on the other hand, only return a more general overview and are not recorded on your credit report. So even if you think your credit score is so low that no lender could possibly approve you for a loan, you should still consider lenders that run a soft inquiry while processing your application.

For one thing, running a soft inquiry means that the lender is considering your ability to repay. That’s a good sign they’re on the up and up.

4. Don’t forget: Defaulting on a no credit check loan could still hurt your credit.

Even if a lender isn’t checking your credit score, failing to pay that loan back could (and probably will) negatively affect your credit.

Some no credit check lenders might report your late or non-payments directly to the the three major credit bureaus (Experian, TransUnion, and Equifax). If you default on your loan, the bureaus will know, and the info will go on your credit report.

And even a lender that doesn’t report info to the bureaus could still sell your unpaid debt to a collections agency. Once it’s been sold to them, that collections agency will likely report the unpaid debt to the credit bureaus.

Likewise, a lender or a collections agency could take you to court in order to reclaim the money that you owe them. These usually result in your wages being garnished until the debt is fully repaid. A court decision against you will also go on your credit report.

Lastly, there are other specialty reporting agencies beyond the big three. Some no credit check lenders will report payment information to these businesses. That info could be used to deny you a bad credit or no credit check loan in the future.[2]

5. Do shop around

Remember, a loan is basically a product. So when you’re looking to buy one, you shouldn’t treat the process any different than shopping for a pair of jeans or a new carburetor.

Shop around! Different lenders are going to be offering different loan products with different terms and different rates. Even if it’s tempting, or you’re running short on time, don’t just take the first offer you receive.

One of the great things about online lending is that you have way more options than you would have just 10 or 15 years ago. There are lot of personal lenders that will let you apply for a loan online and will deposit the funds into your account once you’re approved.

Take a spin on Lendingtree to see what kind of loans are available to you, and make sure to check out the customer reviews to see what kinds of experience other people have had. Odds are, the right no credit check loan for you is out there somewhere. You can read more in Bad Credit Helper: How To Shop for a Credit Counselor.

It’s up to you to find it.

If you have bad credit and need a loan, a personal installment loan from OppLoans is always a safe, reliable choice. You can apply online by filling out a simple application, and you will receive a decision within minutes. We only run soft credit inquiries, which means that applying will not hurt your credit score, and we always verify our customers’ ability to repay.

Personal installment loans from OppLoans come with larger principals ($1,000-$5,000), longer terms (6-36 months), and lower rates (up to 125 percent less) than your typical payday or title loan. Our loans are designed to be repaid in a series of regular, manageable payments that won’t bust your budget. We don’t charge any prepayment penalties either, so paying your loan off early will save you money!

At OppLoans, we think you deserve better than a payday loan. To learn more, or to apply for a loan today, just visit our homepage, www.OppLoans.com.

References:

  1. “Hard Inquiries and Soft Inquiries.” Credit Karma. Retrieved November 10, 2016 from https://www.creditkarma.com/article/hard_inquiries_and_soft_inquiries.
  2. “If I take out a payday loan, could it hurt my credit? Consumer Financial Protection Bureau. Retrieved November 10, 2016 from http://www.consumerfinance.gov/askcfpb/1635/if-i-take-out-payday-loan-could-it-hurt-my-credit.html.

PRO TIPS: Answers From Real Personal Finance Experts

real-personal-finance

Let’s say you have a question about your personal finances. Maybe it’s about how to find a copy of your credit report—is that something you have pay for? Or maybe you want to learn more about building a great monthly budget, like how much room should you leave for unexpected expenses?

With your question firmly in mind, you sit down at your computer, open up Google and type it in. Google responds by delivering you page after page of tips, tricks and … cute panda videos? How do you know that these random web pages delivered to your digital doorstep contain the best advice? Are you really going to put your future into the hands of an algorithm?

Well, we’ve reached out to real life financial professionals from all across the country and asked them what kinds of questions they most commonly received, and what answers they give to them!

Think of it as your “personal finance crib sheet.” Enjoy!

  • Mark Kantrowitz, Publisher and VP of Strategy, Cappex.com, @cappex

The most common questions I hear about how to pay for college, especially questions about student loan debt. For example, how much student loan debt is reasonable and affordable?

I find that people want short answers, and are more likely to follow the advice if it is encoded as simple rules of thumb. In this case, I usually say that the student loan debt should be kept in sync with income. Total student loan debt at graduation should be less than the annual starting salary, and, ideally, a lot less. If total debt is less than annual income, the borrower should be able to repay their student loans in ten years or less.

  • Angel Radcliffe, MBA – CEO, CAS Consultants, @Cas_Dallas

Some of the common questions I receive are:

Why do I have three credit reports & scores? Equifax, Transunion & Experian are the largest credit reporting agencies in the US. Years ago, the bureau’s only reported by region, they now all report country-wide. A creditor is only required to report to 1 credit bureau, although some creditors may report to all 3, hence why data on your report may vary. (Example: Credit Card A with a 2 year payment history is reporting to Equifax & Experian. You apply for a new card ‘Credit Card B’ which checks your Transunion report. Transunion is showing no payment history for any account (assuming credit card A is your only credit account) Credit Card B denies you)

How do you budget? When budgeting you want to look at your NET income. Many make the mistake of budgeting from their gross, NET is what you actually bring home AFTER taxes. I teach my clients the 50/30/20 rule, no more than 50% of net income should be spent on needs, no more than 30% on wants, and save at minimum 20% of net income.

What should I look for when applying for credit? When applying for credit, always look for the lowest interest rate. If you are applying for a credit card, look to see if you will be charged any type of annual/program fee, what the interest rate is and if the card has any perks such as cash back or mileage offers. If you are applying for a loan or line of credit, shop around for the best interest rate, be cognizant of the loan terms/length.

How much of a balance should I carry? If you ever have to carry a balance, be sure it’s below 30%. 30% is a magic number when it comes to your available credit ratio. Staying below this number will help keep your credit score up, if you should ever carry a balance greater than 30% , you will see your credit scores slump at the drop of a dime. Creditors see you as a risk when you carry high balances and you may be denied credit or your credit limits may be reduced if you carry a high balance for long periods of time.

How to balance one’s long-term debt to asset ratio is the most common question I get.

Just like corporations that take on loans to fund their growth, people can take out 1-3 years loans to fund personal projects such as home improvement, large purchases, and starting a personal business. Especially given the low-interest rate environment we are in, personal loans has never been as affordable. The question is, what is the right amount of loans for you?

My advice is, create a personal budget to assess what amount of principal and interest payment you can afford each month. Use the interest you could afford and work backward to calculate the total amount of loans you can take out. If your project produces income in the future, the cost of the loan would be more than covered by your future cash flows.

  • Katie Ross, Education and Development Manager, American Consumer Credit Counseling, @TalkCentsBlog

Many of the questions we frequently get from clients are related to common financial myths or where to access certain information. When it comes to credit and personal finance, there is a lot of misinformation floating around. Here are the three most common questions we get:

1) Can I close a credit card account if there is still a balance on the card? Yes, you can! It is a commonly held belief that an account with an outstanding balance cannot be closed until the balance is paid. The money does have to be paid back, of course, but borrowers can close their accounts at any time. While closing an account is not always beneficial to a credit score, it is often necessary to discourage unwise spending habits and preventing deeper debt problems.

2) How can I access my credit report/score? Many consumers want to know what creditors see when they assess creditworthiness. Any consumer can receive one free copy of their credit report each year from each of the three major credit reporting agencies (Transunion, Equifax, and Experian). To access their free credit reports, consumers should go to www.AnnualCreditReport.com. Each credit report is requested separately, so it is recommended to spread out the three free requests throughout the year in order to monitor for identity theft or fraud. Credit scores are a little trickier. Many banks and credit card companies are beginning to include credit scores on monthly statements. If this service is not offered by a consumer’s account holders, they can buy their score directly from www.MyFICO.com. It is possible to get access a credit score for free, but many sites will only package the “free” score with a credit monitoring subscription service, so consumers should read all conditions before accessing their score.

What’s the difference between debt consolidation and debt settlement? If a consumer is looking for help with their debt, there are a lot of “debt relief” services available that offer different methods of solving debt problems. Debt Settlement or Debt Resolution services are generally considered riskier because they require consumers to allow their debt to go into default so that creditors will accept a lump sum payment to settle the debt. This has severe credit implications as well as tax liabilities. Debt Consolidation or Debt Management on the other hand usually allows those with debt to safely pay down their debt gradually by reducing interest rates and structuring a repayment plan that is designed to fit the consumer’s budget.

To learn more about the ins and outs of personal finance, you can follow these experts on Twitter. And check back next week when we’ll have even more expert advice on the OppLoans Blog.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

Creditworthiness

Creditworthiness
Creditworthiness is a description of an individual’s credit health and history.

What is Creditworthiness?

Creditworthiness is a concept that illustrates what kind of risk a lender might associate with a borrower. Lenders and creditors review a potential borrowers’ creditworthiness to gauge how risky it would be to lend that person money. Creditworthiness is also a major determiner of the interest rates that borrower might be charged.

How is Creditworthiness determined?

Creditworthiness is determined primarily by a person’s credit score. Lenders may also consider, credit history, age, income, employment, existing debt, and types of debt. Factors such as a person’s credit score and repayment history are used to determine how likely they are to make on-time payments, make late payments, or default on loans.[1]

Creditworthiness will not only impact financial opportunities made available to a borrower, but may also affect one’s ability to be hired by certain companies, insurance premiums, and, in some cases, the opportunity to be certified or licensed in certain professional arenas.

What is a credit score?

Your credit score is a numerical depiction of your creditworthiness. If your credit score is high, you have a high level of creditworthiness, and alternatively, a low credit score is equated with lower levels of creditworthiness. The Fair Isaac Corporation created the FICO score, which is the most commonly used credit score today.

Scores can range from 300 to 850; the higher your score is, the more creditworthy you are considered to be. Your credit score is arrived at through the evaluation of multiple factors, such as how much debt you’re carrying as well as whether or not you make payments on time.

A credit rating is a way to assess creditworthiness. Credit ratings are primarily applied to governments and businesses, while credit scores are used for individuals. Just as your creditworthiness is assessed when borrowing money, the credit history of countries and businesses is similarly evaluated. While credit scores usually range from 300 to 850, the credit rating scale is from AAA (excellent) to C and D.[2] The largest credit rating agencies include Standard & Poor’s, Moody’s, and Fitch. You can think of these agencies as being similar to TransUnion, Equifax, and Experian, but working with credit ratings instead of credit scores.

Knowing what information goes into factoring your credit score the first step in ensuring your creditworthiness remains healthy. A person’s creditworthiness can be improved, but it can be a slow process. We suggest always trying to make payments on loans or credit cards on-time—that’s a great way to start to improve your creditworthiness.

What is credit history?

The three major credit bureaus (TransUnion, Equifax, and Experian) keep records of consumer credit usage and accounts in what’s called a credit report. A credit report is simply the written record of one’s credit history. Credit histories (found in credit reports) will contain information on open and closed credit accounts, credit inquiries, derogatory marks, and on-time payment histories.[3]

Your credit history will not contain information on your checking and savings accounts or any personal information such as your income, race, or age.

The information in your credit report and credit history comes from lenders, collection agencies, and public records such as bankruptcies and liens.[4] A credit report can be requested by lenders, landlords, and employers. It is used to make decisions related to borrowing, employment, insurance, and other purposes allowed under federal law.

What is my Creditworthiness?

The first step to improve your creditworthiness, is to know what it currently is.

Under the Fair Credit Reporting Act you have many rights,[5] including the right to a free credit score. You also have the right to be told if information in your file has been used against you, the right to deny employers access to your credit file, and the right to seek damages if a credit bureau violates your protections. The Federal Trade Commission offers a complete list of your rights.

To see what’s in your credit report, request your credit report through the government’s sanctioned site at www.annualcreditreport.com. You are entitled to a free credit report once a year from the three major credit bureaus.

Under law, credit bureaus can only share your information with others in the event of a legitimate need. People who might qualify to see your report based on this include insurers, creditors, landlords, and employers.

If you notice errors in your credit report you should, in writing, inform the credit bureau that’s reporting them. Under law, credit bureaus are required to investigate them in a timely manner—usually within 30 days. For more information, check out the Federal Trade Commission’s step-by-step instructions for disputing credit reporting information.

How can I improve my Creditworthiness?

You can become more “creditworthy” by improving your credit score. This can be done over time by adopting more responsible credit, borrowing, and spending habits. Generally, the first step to take is to get up to date on all of your bills. If you have outstanding debts, pay them. Also, maintaining a low balance on your credit card, making on-time repayments on bills and installment loans will improve your credit score, and—creditworthiness—overtime.

References:

  1. “Creditworthiness”. Investopedia. http://www.investopedia.com/terms/c/credit-worthiness.asp. Accessed September 26, 2016.

  2. “Credit Rating”. Investopedia. http://www.investopedia.com/terms/c/creditrating.asp. Accessed September 26, 2016.

  3. “What Is Your Credit History?” Credit Karma. https://www.creditkarma.com/article/What_is_your_credit_history. Accessed September 26, 2016.

  4. “What Is a Credit Reporting Company?” Consumer Financial Protection Bureau. Accessed on October 12, 2016, at http://www.consumerfinance.gov/askcfpb/1251/what-credit-reporting-company.html.

  5. “A Summary of Your Rights Under the Fair Credit Reporting Act.” Federal Trade Commission. Accessed on October 12, 2016, at https://www.ftc.gov/sites/default/files/documents/one-stops/credit-reporting/pdf-0096-fair-credit-reporting-act.pdf