There are finance companies out there that offer “No credit check loans”.
Usually if you are applying for one of these loans you are at the end of your tether and are struggling to pay the bills. It can seem appealing to be able to get a quick and easy loan to tide you over, particularly if the company won’t check your credit history.
The problem is that these types of loans have interest rates that are very high. This makes them hard to ever pay off. And often you will need to apply for another one of these loans to keep everything going.
This can lead to financial distress for everyone.
As a credit repair company, we often speak with clients who have applied for these types of loans. They find their credit score is low because one of these companies has placed multiple enquiries on their credit file – despite promising that they would not do a credit check.
Having too many credit enquiries on a credit file is becoming one of the biggest barriers to enter the credit market. Having too many credit enquiries can impact your ability to get a home, car, personal loan and especially a credit card. What is too many? Any more than 5 per year can mean you can’t move forward and get the finance you need.
Today we had a client ask for help to get their credit file cleared up. He complained that he had 50 credit enquiries on his credit file and he was not sure why. Upon further investigation and after asking additional questions we discovered that these were put on his credit file by companies who advertised ‘no credit check loans’.
He said that most of these companies had not approved his application for a loan with no explanation as to why. He said that he did not know and was not told that these companies would check his credit file. This client said he chose to borrow through these companies because of his credit history in the first place and now they were making his credit history worse!
These “no credit check loans” companies are clearly engaging in misleading contact in advertising this message.
Credit enquiry listings on your credit file are sometimes seen as less harmful than defaults or court actions. But sometimes they are a lot worse than a default listing. Getting a default listing removed from a credit file will increase a credit score. However, if there are also a lot of credit enquiries on the file, even if the default is removed, the score will not increase as much as if there were few or none.