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Is There Always a Credit Check Involved with a Loan?

If you have never had a loan before, you might be wondering about what the process is. In particular, does the lender always have to carry out a credit check? Will they just give anybody a loan? Often, people assume that if you are willing to pay a lot of money, you can just get a loan without any problems. But, you should know that credit checks are very important. Let’s take a closer look at what we know.

What is a Credit Check?

First of all, it is important to understand what a credit check is. Essentially, this is when a company is going to take a look at the credit report you have. They want to see whether you have had credit in the past ad if you have been able to pay and manage this correctly. A company can see your finances, which includes existing debts. 

The credit check is to see whether you are reliable and trustworthy, and able to handle payments. So, before you get things like a credit card, car finances or a loan, the provider will carry out a credit check. Note that there are two types of checks available.

Soft Check

There is a soft check that companies can carry out, and this is not going to affect your credit score. They can still see some of your report, but it is more just to give you a quote or a recommendation.

Hard Check

A hard check is different, and this one is more comprehensive. It will be something you have to go through when you are making an application for credit. The company receives your credit report, and this will affect your credit score. This can be for around 12 months in some cases.

Is a Credit Check Always Used for a Loan?

If your credit score is quite disappointing, you might be wondering if you always have to be checked before getting a loan. There are some misconceptions about this and the idea that you can skip this part depending on the loan you get. However, this is not true. Know that every legitimate loan company is going to carry out a credit check before awarding you credit. This is not a stage in the process that you are able to sip.

Therefore, yes, you are always going to have your credit score checked before being given a loan. This is not something that takes long. For example, you can get online loans quickly at My Quick Loan. You have to fill in some details, and they will return the options you have with lenders. Then, before you are given the money, you will have a credit check.

Note that if you do have bad credit, this does not mean that you will be automatically rejected when it comes to a loan. Sure, there might be some lenders that do not want to give you credit, or they may limit how much they give you. But, you should not rule out being able to get a loan. Some providers even specialise in borrowing with bad credit. Something you can expect is higher interest rates.

Are There Ways to Improve Your Credit Score?

Thankfully, there are things you can do to improve your credit score. They can take some time. But, they are worth it as they can mean that you have a better chance of getting a loan in the future. It can also increase the amount of credit available to you, as well as lower the interest rate offered to you. So, here are some ways you can improve your credit score.

Register on the Electoral Roll

Are you on the electoral roll? If you are not, this is something you can do to improve your credit score. It means that you are proving where you live. It is something easy and simple you can do straight away.

Check the Information

You should always make sure you are checking your credit report. If there is an error, this could be something that is affecting your score. You want to ensure that all of the details are correct and up-to-date. If you find an error, contact the lender that this is related to.

Pay on Time

If you already have credit, make sure that you are paying off your bills on time every month and in full. This is going to demonstrate that you are able to handle your financial responsibilities. Over time, this is going to have the effect of boosting your score.

Do Not Apply for Too Many

Remember that many lenders giving you credit are going to leave a hard search on your report. If there are too many of these at once, this is going to have a negative impact on your rating. Therefore, avoid applying for too much credit at one time. You should spread out your applications and be aware of the last time you applied for one.

Give it Time

When improving your credit rating, it is easy to get impatient. You want the rating to go up overnight. But, this is just not how the process works. Instead, it can take some time to see positive results. So, you have to be patient with the process and know that if you are doing all of the right things, you will be rewarded.

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