It didn’t matter how much we were earning or whether we were careful with money – that never seemed to be recognised by lenders.
What’s on your credit file is still very important but there have been a number of changes in lending over the past twenty years. These changes are particularly apparent with the emergence of bad credit loan providers for people with less than perfect credit histories.
Now, over five million loans a year are made to people who have missed the odd bill and made an occasional financial mistake in the past. These loans are provided by specialist lenders who take a different view to mainstream banks on what being 'creditworthy' means.
These lenders now actively consider your current financial situation, how much you earn, how much you spend, how much is left over at the end of the month, and so on when deciding whether to approve your loan application or not.
While there are no such things are no credit check payday loans in the UK (we’ll explain why in a moment), it seems true to say that there are a lot more options now for people with bad credit histories than in the past.
What do I need to know about credit scores?
There are three companies in the UK called Equifax, Experian, and TransUnion and they are all credit reference agencies.
What credit reference agencies do is maintain a constantly updated file on what money people borrow, how well they pay that money back, and other important personal and financial information.
When a payday lender or a credit card company wants to find out more about someone who is asking them for a loan or a credit card, they approach one or more of the credit reference agencies for either a background check (called a soft credit search) or a complete credit report (called a hard credit search).
The information they find will, in the case of a soft credit search, give them an idea about whether someone is likely to be approved for a loan, a credit card, a mortgage, and so on. But when these companies want to come to a final decision about whether they’re going to approve your application, they run a complete credit report on you. They do this, first, because it helps them make a decision on how likely you are to pay them back and, second, they are legally required to do so by the Financial Conduct Authority (FCA).
The FCA oversees all lending in the UK including payday loan lending. And what the FCA tell credit providers is that they must run a hard search on someone who makes a full application. They must also do a full affordability assessment on the borrower to make sure that they can make the repayments without getting into financial difficulty.
Each of the credit reference agencies gives you a credit score. That’s part of how a lender makes up their mind but it’s not the only part. They look deeper into your full credit report to find out more information, including:
County Court Judgements:
County Court Judgements (CCJs) are issued against people who repeatedly fail to make payments due to a credit provider or other type of company. Your credit report contains information on any and all CCJs lodged against you.
Home repossession:
Most lenders assume that, before any other debt or bill, you will pay your mortgage off first as a priority. So, if you can’t keep up your mortgage repayments and you lose your home, this is a major negative factor on your credit score.
Bankruptcy:
If you have been made bankrupt or you are subject to an Individual Voluntary Arrangement (IVA), this will dramatically lower your credit score. In most cases, you will have to apply to a person in legal authority for permission to apply for a loan too.
Voters’ Roll:
Being on the electoral register at your current address gives lenders peace of mind that you do actually live where you say you live. If you’ve been listed on the voters’ roll at your previous addresses too, that counts in your favour.
Past and present late payments:
Your credit report keeps a record of every payment you make – and miss. The odd missed payment makes either little or no difference at all to your credit score. However, if you find that you’ve missed a lot of payments in recent times (even if you have settled them later), that will adversely affect your credit score.
Current debt balances:
You may have a number of different credit accounts open already – perhaps a bank overdraft, a few credit cards, maybe another loan, and also a mortgage in a lot of cases. For your overdraft and credit cards, you will have a balance (what you’ve actually spent on these accounts) and a limit (what you can spend).
Lenders like it if the difference between your total balance and total limit is as high as possible because it shows you’re handling your debt well. If your credit cards and overdraft are maxed out, lenders may worry that you’re struggling with money and they might be less inclined to approve your application.
That’s a lot of information about you. Your credit report is constantly maintained and most credit reference agencies update your credit score once a month. Your report also contains more information about you, including your date of birth, any previous names, any financial associations you have with other people, your current address, and your previous addresses.
No credit check payday loans online
So, we’ve established that no credit check payday loans don’t exist. Please be very careful if anyone or any company tells you that they offer one – they’ll almost certainly not be authorised and regulated by the FCA and they’ll almost certainly be operating illegally. No credit check loans are not regulated by the FCA.
Remember that payday loan companies assess the people who apply to them for help differently than the banks do. While what’s on your credit report remains very important, they also seriously take into account your current financial situation and how you’re doing now. You can see that by the fact that over 5 million bad credit loans are made every 12 months, and many of those loans are to people with poor credit histories.
Payday loans offer other distinct advantages too, including:
Freedom over how you spend your loan money:
If you tell us what you need your loan for, we can match you up with the lenders who are happy to approve a loan for that purpose. If you approach lenders direct, you might make an application that they would say “yes” to but they could then turn you down because of the reason you want the money.
Fast turnaround and response:
Most payday loan companies (both direct lenders and brokers) only accept their applications online. Their decision on whether to approve your loan request or not is made by computer meaning that your application can be approved very quickly, and the money could be sent to your bank account minutes later*.
Flexible loan amounts:
Payday loans aren’t meant for buying big cars or for paying for holidays. The amount of money people need on their payday loans is usually quite small to cover an unexpected bill or expense which has to be paid straight away.
With payday loans, you can borrow from £100 to £1,000. However much you ask for, make sure that you don’t borrow more than you need. Better still, if you can reduce the amount you need to borrow by using money you’ve saved, you’ll pay less interest because your loan amount is smaller.
Additional consumer protection:
Payday loans are regulated by the Financial Conduct Authority (FCA) and lenders offering payday loan brokers must offer loans which comply with the three following important consumer protections:
- You must not be charged more than 80p per day for every £100 borrowed
- Your lender can not charge you £15 in management fees (for example, if you miss a repayment)
- The total amount you pay back to your lender in interest and fees must not be greater than the amount of money you borrowed in the first place.
Alternatives to payday loans
Payday loans should only be used if you can’t find the money you need from elsewhere. Other places you could look are:
Friends and family:
The people we love are often the first to step in with offers of financial help when we need it. Make sure you agree with your friend or family member when and how much you’ll pay them back. Please be careful though that money does not come between you and your friend or family member and that you make repayments when you’ve agreed to make them.
Repayment plan:
If you are well known to the person you owe money to, it might be worth asking them for extra time to pay rather than taking out a payday loan.
Emergency fund:
Most of us put aside a little of what we bring into our homes for rainy days. If what you have saved up does not cover the bill you need to pay, consider using some or all of your emergency fund to reduce the amount you borrow on your payday loan.
Earning more:
Could you ask your boss for an advance or even a bonus? If business seems to be going well, you might even think about asking for an advance and a raise at the same time? Most employers would rather you go to them so that they can have the chance to help you – pick your time to ask carefully. However, please be aware that not every employer will welcome a request for a pay increase so you may wish to bring in additional income from a secondary source – for example, the gig economy or by freelancing.
Get refunds on recent spending:
Are any of the items you’ve recently bought that you might not really need still within their return date? If so, you could raise extra money fast by taking them back to the shop or by posting them back to the online retailer.
Remember that most bad credit providers are set up to help people with less than perfect credit histories. It’s always better to stay out of debt though so, if you can, find a way to avoid taking a loan out or to reduce the amount you need to borrow.
Apply through GrowingPower
With GrowingPower, you can apply for a loan of £100 to £10,000 with a repayment period of between 3 months and 60 months. We’re really happy to work for borrowers with bad credit scores too.
Please do not apply for a bad credit loan if you are not certain that you can meet the repayments on time and in full without causing yourself further financial hardship.
If you are in debt and you’re concerned that the debt may be getting out of control, there are a number of organisations who can provide help, support, and advice free of charge. You may benefit by contacting one of the following – StepChange, PayPlan, National Debtline, the Debt Advice Foundation, the Money Advice Service, and Citizens Advice.
To apply for a loan through Growing Power, please click here. We don’t charge for our service and you don’t have to accept any loan offer we find for you.