A no credit check loan is exactly what it sounds like – a loan given without the requirement of a credit score check. For more information on credit checks, see below. These loans are usually in the form of payday loans. Whilst they may seem appealing for those with a poor credit rating, there is no such thing as a ‘safe’ no credit check loan. All legitimate direct lenders in the UK are authorised by the Financial Conduct Authority (FCA), which requires that all lenders conduct a credit check prior to lending. Therefore, if a lender in the UK is offering a loan without a credit check, they are unauthorised. Their lending may be unethical or even illegal, with problems such as very high repayment fees that can leave you in a very difficult financial position. As a borrower, you can be left in considerably more debt than when you started.  

Getting an authorised loan that requires a credit check can be a longer and more difficult process. However, it is highly recommended for your own safety that you never enter into a loan agreement with an unauthorised lender offering loans with no credit check. Before you deal with a lender, if you are unsure of their credentials, you can check whether they are authorised on the Financial Services Register. If they are not, you have no legal protection and cannot complain to the Financial Ombudsman if issues arise.

Credit checks are assessments used by lenders to work out how likely they are to get money lent to a borrower back, and therefore how risky the loan is. All authorised direct lenders in the UK are required by the FCA to conduct a credit check prior to lending to an applicant. The score you get from a credit check is based on your present and past financial situation.

There are two types of credit check. A soft check is a brief background check carried out by the lender and is based on key pieces of information. These give an indication of how likely you are to pay back a loan but are invisible to other lenders and so will not affect your likelihood of getting a loan with a different provider. A hard check is a complete check of your financial situation and history. These checks stay on your record for a year and will be visible to any other lenders.

Lenders look for a number of things when they carry out credit checks, for example:

• What you do for work and how much you earn
• Where you live or have previously lived, and how long for
• How much debt you currently have
• Whether you have filed for bankruptcy
• Failures to pay secured loans that have led to repossession, for example of a car or a house
• Any previous County Court Judgments

Even if you think you will struggle to secure a loan given a poor credit rating, you should never risk taking a no credit check loan, especially as there are many alternatives available. One option is a guarantor loan – a loan in which someone (such as a family member) with a strong credit score provides a guarantee for your loan, making it lower risk for the lender.

There are also many lenders that are set up specifically to provide loans to ‘high-risk’ borrowers – those that have a poor credit history. Whilst these can come with more expensive repayment fees, there are plenty of online tools you can use to compare loans to find the cheapest option. Bear in mind that you will have a unique set of needs and so you should take the time to find the best loan for you. You should remember to make sure that any loan comparison tools you use are only conducting a soft credit check, or the check will remain on your record and can lower your credit rating.

You may want to begin by checking your credit score before applying to any lenders directly. There are a number of credit reference agencies (such as Equifax or Experian) that you can get in contact with to check your score for free. Most of the time, this can be done without the check remaining on your record (a ‘soft’ check – see above), meaning it will not lower your credit rating. Doing this before applying for a loan will also allow you to check that all the information is correct and up to date.

If you are concerned that your rating is too low to secure a loan, or you want to increase your chances of getting a loan on more favourable terms, then you can take steps to increase your credit score. The key thing to do is to carefully manage your finances, and to ensure that repayments on any loan, for example your mortgage, are made on time and in full. The longer and more consistently you do this, the better your credit rating will be.