Chapter 1

What is a No Credit Check Loan?

A no credit check loan is a loan in which the online lender does not do any type of credit check or pull any type of credit report on you as the borrower before lending you the money.

Traditionally, direct lenders base their decision on giving you a payday loan on a variety of factors, but one of the most important is your “creditworthiness”. Creditworthiness, or how suitable you are to receive credit, is often based on your reliability in paying money back in the past among other factors. Since most of the time, a lender doesn’t know anything about you, they turn to outside sources to get a better idea about your creditworthiness through a credit check. This is where credit bureaus such as Expedia, TransUnion, and Equifax come into the picture. Credit bureaus each have their own formulas they use to calculate your “credit score” turning your credit worthiness into an easy number. The mostly widely used credit score number is the FICO score, which can range from 300 on the low end to 850 on the high end. When a lender inquires about your creditworthiness, there are a couple of types of credit checks that are typically pulled, each with different implications.

What is a credit check?

If you’ve ever heard of a “Soft check” or a “Hard pull” these refer to the two types of credit checks. When reviewing your credit score or applying for a new loan it’s crucial to know the difference between the two credit checks and how these checks can impact your score. Whether soft or hard, each is also considered a credit inquiry and they are ways to get a “credit rating” on you specifically.

Soft Checks or Soft Pulls

A soft credit check or soft pull occurs anytime you or a creditor “looks” at your credit. Soft checks are important as they are the only type of credit check that does not impact your credit score. While a soft check won’t change your credit score, they are still listed on your credit report when performed by a lender.

Since soft checks don’t affect your credit score, many lending companies will pull this information to pre-approve customers that match their products. Employers also tend to use soft checks if they are pulling your credit for a job application. Interestingly, any time you check your score through a credit bureau or other service, you’re performing a soft check on yourself.

Hard Checks or Hard Pulls

Unlike soft checks, hard checks can impact your credit score. Hard checks are used by lenders to pull more in-depth information while making a final loan decision and are usually one of the last steps when applying and accepting a loan.

Each hard credit check can shave off 5 to 10 points from your credit score.

Each hard credit check can shave off 5 to 10 points from your credit score. When it comes to credit reporting, all hard checks within 45-days from each other are reported as the same credit check. Since hard checks are bundled in this way, you don’t need to worry about hurting your credit score when shopping around for better rates.

Since these types of credit checks have such an impact on your score, any hard pull requires your consent in order to be processed. It’s generally a good idea to review your credit report for new inquiries. If you see hard checks you don’t recognize, it’s a good idea to follow up with your bank and lender in order to prevent fraud.

Other types of credit checks

When people refer to credit scores, they’re almost always talking about your FICO credit score. The FICO credit score was introduced over 25 years ago in an effort to quantify risk based on a few variables. The exact formula for calculating this credit score is a closely guarded secret, however, repaying loans on time, payment history, and keeping debt small are some proven ways to increase your credit score.

As with most industries the credit reporting industry has seen rapid change in the past decade as new business and established companies seek to innovate on older techniques. Some of these alternative credit reporting companies, such as Clarity, are smaller branches of the three major bureaus. Others, like Innovis, have grown almost as large as the other bureaus. These alternative credit reporting companies use a collection of similar data as well as other less common data to compile a view on your creditworthiness.

Chapter 2

How Do No Credit Check Loans Work?

No credit check loans are loans where your lender completely skips the credit check entirely. Instead of looking at your credit score and your credit report, lenders will look at alternative data to help determine your creditworthiness.

ALTERNATIVE DATA MAY INCLUDE YOUR:

BANK BALANCE

EMPLOYMENT HISTORY

INCOME

EDUCATIONAL BACKGROUND

Through this, lenders are able to get a more holistic look at the customer, excluding credit history, before making a decision on lending you money. Payday lenders tend to look at your income and employment to make a lending decision. Instead of pulling your FICO score, Possible looks at alternative data such as your bank account history to determine whether to give you a loan.

Many people withcredit scores of 550 and below can still get a loan with Possible, get the cash they need and build credit.

Chapter 3

Why Do Lenders Skip the Credit Check?

Credit scores are calculated based on your credit history. Basically, the longer your history of balancing debit and repaying loans, the higher your credit score will climb over time.

According to research by Experian in 2017, about 25% of American adults have a “thin” credit file. A “thin” file usually lists between 1-4 credit accounts and can make it difficult to find qualifying loans. Another 16% of adults have little or no credit history, making them essentially invisible in credit checks. Less-than-perfect credit is absolutely quite common.

25 %

of American adults have a “thin” credit file. According to research by Experian in 2017.

16 %

of adults have little or no credit history, making them essentially invisible in credit checks.

Because of this, people with thin files or a lack of credit history can find themselves in a catch-22. They don’t have enough credit history to qualify for loans, credit cards, and other debt, and they can’t build credit because they don’t have any outstanding loans, credit cards, and other debt. Unfortunately, by relying on credit scores alone, lenders lock out those who have no to little credit history or are trying to rebuild after accumulating bad credit.

For those with thin files, there are a few options for building credit history. Secured credit cards and credit builder loans can offer a foot in the door but require a larger up-front cash commitment. Short-term loans, payday loans, installment loans, and payday alternative direct lenders can offer options for building credit. Lender rates and fees tend to be higher and provide a shorter period to repay due to the higher risk lenders take on by extending this type of credit to borrowers.

Learn more about payday loans and payday loan alternatives to determine if that’s the right option for you. Personal loans can also help build credit history but personal loans can be harder to qualify for due to minimum credit scores even if the fees are lower.

Lender rates and fees tend to be higher and provide a shorter period to repay due to the higher risk lenders take on by extending this type of credit to borrowers.

For those with thin files, there are a few options for building credit history. Secured credit cards and credit builder loans can offer a foot in the door but require a larger up-front cash commitment. Short-term loans, payday loans, installment loans, and payday alternative direct lenders can offer options for building credit. Lender rates and fees tend to be higher and provide a shorter period to repay due to the higher risk lenders take on by extending this type of credit to borrowers.

Chapter 4

Who Can Apply for a No Credit Check Loan?

If you’re considering a no credit check loan, there are simple factors considered to qualify as a loan applicant. An individual will qualify for a no credit check loan if they…

Are 18 years or older

Are a U.S. resident and can provide a U.S. address of residency

Maintain regular income or are employed

Have a bank account (needed for deposit of the loan

Can share credible contact details

Chapter 5

Types of No Credit Check Loans

The only thing no credit check loans have in common, is the absence of a credit pull or credit inquiry on the borrower. Many types of loans have a no credit check alternative. However, few of these are no credit check long term loans. These loans tend to be most common with short-term and payday loans.

Personal and Payday Loans

Personal and payday loans are the most common types of no-credit check loans. The Loan amount may vary from a few hundred dollars to thousands. These loans can serve as instant loans due to their oftentimes quick approvals. Since payday loans are inherently more risky for lenders and are considered unsecured loans, they tend to have higher interest rates and fees and shorter repayment periods. While almost all personal loans, student loans, car loans, mortgages, etc. are reported to the credit bureaus, traditional payday loans tend to be unreported. If you’re looking to build credit, make sure your lender regularly reports to the three major credit bureaus. Here at Possible, we directly report to the credit bureaus so your credit can be built over time. Without consistent reporting, your credit score will never improve, no matter how often payments are made on time.

Installment Loans

Installment loans are loans that are approved for a set amount and cannot be increased until the current loan is completely paid off. These limitations help lenders limit their risk while helping customers gain access to larger loans as they demonstrate reliability. A long term Installment loan is paid back over time in specific amounts and because there are multiple repayments, as long as the lender reports payments to the credit bureaus, you build credit history. Like payday loans, short term installment loans can tend to have higher interest rates, especially if you start missing payments. A Possible loan is also considered an installment loan that builds credit history.

Credit Builder Loans

The primary purpose of a credit builder loan is to build credit history. Those with no credit history or bad credit can use credit builder loans to try to improve their credit score. Credit builder loans usually involve borrowing money which is immediately deposited into a bank account controlled by the lender.

As you repay the money borrowed, you build credit history.

Loan amounts usually range from $300 to $1,000. Rates and fees are low on a credit builder loan although there can sometimes be an origination fee. Once the loan is fully repaid, you can access the loan and control of the bank account is given to you. Credit builder loans are available at many banks and credit unions.

P2P Lending

While traditional lenders overlook a growing portion of the public, new types of lending have appeared to fill in the gap. One of the more radical shifts has been the appearance of “peer to peer” lending markets. Peer to peer lending matches borrowers with individual lenders to finance loans without the backing of any major banks or financial institutions. These loans tend to have decent interest rates due to the competitive nature of the market and some lenders may be more willing to approve lenders with lower credit scores than traditional banks. While P2P lending can be a great alternative to payday loans, most lenders will not report to the credit bureaus, making it difficult to build credit. Since lenders will be working directly with an individual rather than a company, P2P lending offers less services and support than lending with a bank or other established money lender.

Title Loans

A title loan requires an asset from the borrower as collateral for use by the lender. Because these are secured loans and there is less overall risk of loss for the lender, no credit checks are common. One of the most popular types of title loans is one that uses a car as collateral called car title loans. Loan terms and interest rates can vary significantly depending on your lender.

Chapter 6

Pros and Cons of No Credit Check Loans

While no credit check loans can be a helpful tool in building credit, it’s important to understand the strengths and weaknesses of the process before making a decision.

Pros of No Credit Check Loans

Your current credit score isn’t taken into account. If you have bad credit history or a lack of credit history, no-credit check loans can be a great entry point to building credit.

Your credit score isn’t impacted by applying. With poor credit, it can be difficult to be approved for new loans. And with every hard credit check, your score can go down, a short-term financial issue.

Better chances for approval. No credit check lenders usually have their own criteria for lending money. Payday lenders and other companies may take a look at a few high-impact factors such as your income and employment history, while still others will create a complex system to better understand your creditworthiness.

 

Cons of No Credit Check Loans

No credit check loans, such as short-term loans and payday loans, tend to have much higher rates and fees than traditional loans. This is usually caused by the higher risk of lending. Depending on the company you work with, payday and short term loan rates can vary between 100% to over 700% APR (annual percentage rate).

The APR or annual percentage rate of a loan from Possible usually ranges from 150-200%.

Your options are limited when it comes to getting a no-credit-check long term loan. Long term loans are rarely available for those with little to no credit. If they are, they tend to be secured loans in which important things like your car or house are used as collateral. 

These loans tend to be smaller in dollar amounts and last a shorter time frame. Since no credit check loans tend to be riskier, lenders usually extend smaller loans to be repaid within a few months with at most monthly payments. Balancing your debt and keeping track of your repayment schedule is important to stay out of a debt cycle. Since the payback periods tend to be shorter, individual payments tend to be larger. Some lenders will increase the amount of money available for use as you build repayment history.

Chapter 7

Alternatives to No Credit Check Loans

If you have decent credit, a plethora of options for loans are available for you instead of no credit check loans. However, if you have little to no credit, your options become much fewer. A few of the best alternatives to no credit check loans include:

SECURED LOANS

These are likely your best option if you are in need of some serious money.

CASH ADVANCE

If you just need a small amount of money to pay some expenses, an instant loan like a cash advance might work for you.

PAYDAY LOAN ALTERNATIVES

Similar to payday loans, a payday loan alternative offers you instant cash but at more reasonable interest rates and with a longer repayment term. With Possible Finance, you can get a cash loan in minutes and build your credit history as you repay the loan over time. It’s a win-win, making it the best option for a no credit check loan.

CREDIT UNIONS

In some cases, a local credit union may be a good alternative because they can provide a small personal loan and are often flexible with the repayment term.

ONLINE LENDERS

For those that have a low credit score, online lenders may be a viable option. However, be cautious of the trade off— high interest rates and fees.

LOANS FROM FRIENDS/FAMILY

Lending from a friend or family can also serve as a personal loan with more forgivable terms and likely less interest.

Keep in mind that all of these alternatives have their benefits and risks so it’s important you take these into account before you take action.

A Possible loan doesn’t use your credit score.

Get up to $500* and build credit.
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Chapter 8

How to Get a Credit Check With No Loan Required

While the decision process for no credit check loans may differ between companies, most follow a similar roadmap. Lenders will generally need to: verify your identity, collect information on your financial health, assess the risk in lending money to you, and finally, make a lending decision based on their assessment. Let’s take a look at how this process works with an application with Possible.

1) Verify

In order to prevent fraud and identity theft, a lender will need to verify your identity before extending a new loan. This process usually involves a lender needing a driver’s license, social-security number, or other documents that can prove your identity.

At Possible, we require a state issued ID and a valid social security number in order to verify your identity with government records. We also ask for a selfie at the time of the loan application to make sure nobody else uses your information to apply.

2) Collect

After a lender knows who you are, they’ll need to collect information in order to make a lending decision. This is where the credit checks can happen. Your lender will leverage your credit score as a measure of your ability and willingness to repay the loan.

When applying for a Possible loan, you’ll link your bank accounts. Since we don’t look at your FICO score or a credit report, we rely on the information you give us. Our system is able to look at information such as your bank balance, income, and history of returned payments in order to give us a better idea of your financial health and creditworthiness.

3) Assess

Now that a lender has collected the information they need, they can begin the process of assessing the risk of your loan. Each lender has a different process for underwriting loans, each using and interpreting your information differently.

With a Possible loan, we look at your overall financial health to make sure our loans are able to help without adding financial burden. Factors such as your income and the number of other loans you have open help us avoid over-lending and doing more harm than good.

4) Decide

Once a lender has evaluated the risk of extending a new loan to a borrower, they decide on the amount of funds available to you. With a line of credit, this will be the total amount you can borrow while more structured loans will give you access to a set amount of funds. Short-term cash advances or payday loans will have a smaller amount of money available to you.

Possible loans are repaid through multiple installments. Once we have a better picture of your financial health, our algorithms help us determine the amount we can safely lend to you. We look at a variety of things like recent income and current bank balance before making a financing decision.

Chapter 9

Get a Flexible No Credit Check Loan Today

At the end of the day, there’s only one thing shared between types of no-credit check loans and that’s the lack of a credit check. It’s crucial to fully understand the terms of any loan you are applying for as well as researching the company you’ll be working with. While many companies offer no-credit and low-credit loans to help customers with bad credit to build credit history, predatory lenders also operate in this space, hoping to capture customers without much prior knowledge about lending. We started Possible to provide an alternative to traditional predatory payday lenders and give our customers access to cheaper, more flexible, and kinder loans that build long-term financial health.

A Possible loan doesn’t use your credit score.

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