The Truth About No Credit Check Loans
Credit score is no longer that unknown number which individuals are not aware about. These scores have gained a lot of popularity in the recent past, with more and more number of financial literate checking their credit score. However, we might have many more who are yet to realize the importance or know what the credit score stands for.
For the benefit of all our readers, credit score is a simple three digit number that is a representation of the creditworthiness of an individual. This is calculated based on past credit behavior which is collected by the credit bureaus. All banks and other financial institutions with an asset base exceeding Rs 100 crore are mandated by the RBI to report all credit actions of their customers to at least one of the 4 credit bureaus operational in India.
Credit Bureaus use their algorithm to assign values to each of the actions and come at a 3 digit number called the Credit Score. Depending upon each of the actions, figure may end up anywhere between 300-900. All credit bureaus in India follow the same scale, however an individual’s credit score may vary across the bureaus due to the calculation methodology followed by each bureau.
Generally, the credit scores are ranked as:
Credit Score Ranges Categorization of Credit Score
800 and above Excellent
700 -800 Good
500 and below Bad
However, your lender may choose to assess you differently based on their internal policies or risk assessment criteria that may include parameters beyond credit score.
Additional Reading: Know how bad is your credit score
Credit Score and Credit Approval
It is common knowledge that the closer your credit score is closer to the 900 mark, the easier is your credit approval. However, mistakes might have been done in the past due to which an individual may be experiencing poor credit score. Landing approvals on applications with bad credit score is next to impossible. And as you must be aware credit scores cannot be improved overnight. It takes sustained efforts over a period of time to see your credit score move up.
The one of the `option for those with bad or not so good credit score is No Credit Check Loans where the chances of approval even without a good credit score might be high.
What are No Credit Check Loans?
As we have put in the paragraphs above, a bad credit score is a clear case of credit rejection. However, the need for credit could come up anytime and you may not even have the time to wait it out till your credit score improves.
There could be certain loans that may still be available to you in spite of your bad credit situation.
As the name suggests, No Credit Check Loans are those loans that are available to you from those lenders who do not check your credit score.
Which are the Lenders Which Lend No Credit Check Loans?
As you might have read earlier, all banks, non-banking financial institutions, housing finance companies, rural banks, etc have to report your credit activities to the credit bureau. This also means that before giving you approval on any credit they check your credit score and take a decision on lending to you based on your creditworthiness.
If these are not the banks and other big financial institutions, then who can lend to you without a Credit Check?
Do not worry, there are certain kinds of lenders and loans available even without credit checks. These could be:
Loans From Fintech Lenders
Loans from Peer to Peer Lending Platforms
Loans from the unorganized sector
Loans against a Collateral
Is it Safe to Avail a No Credit Check Loan?
The fact that these lenders do not check your credit scores might have got you excited that there is some hope yet for those with bad credit scores. However, on the other hand, you might also be thinking if these loans are really safe enough?
CreditMantri, as your Credit Coach is always at your side. We bring to you a detailed analysis of all these lenders so that you can make an informed choice if you ever want to avail a no credit check loan.
Loans From Fintech Lenders
Fintech lenders are new-age lenders who carry on their business of lending online. These lenders do not check for your credit score with the credit bureaus but each fintech lender follows their own system of customer evaluation which may be based on your social media profile or other digital imprints like shopping data, etc. They make extensive use of technology and other platforms to make credit accessible to you, hence earning the name- Fintech Lenders.
Even among the fintech lenders, there may be many who may not be as trustworthy. Moreover, each day there are more and more fintech lenders opening shop to cater to the credit needs of individuals. So it is good to approach well-known fintech lenders or those with a good number of reviews and frequent mentions of good service in the media.
We understand that it might be difficult for an individual to gauge the trustworthiness of a lender. To help you further in this regard, CreditMantri has entered into partnerships with highly credible fintech lenders and you can avail short term loans, line of credit or shopping loan on our website.
Loans from Peer to Peer Lending Platforms
You can avail loans from peer to peer lending platforms as well. There is no credit check involved here and the lenders on these platforms are all common men. The company just provides a marketplace for the lenders and borrowers to come in contact. However, recent regulations requires Peer to Peer NBFCs also to register with RBI. It is good to ensure that you borrow only from the registered platforms.
Also, do not forget to check about the interest rates and other charges payable on availing a loan on these platforms. They generally tend to be higher.
Collateral Based Loans
Collateral based loans like loan against a Fixed Deposit, loan against Gold or Loan against property or securities are also other forms of loans available for which there is no scrutiny of your credit score. However, you need to have an asset that can be pledged with the lender during the period of the loan. Also, the loan amount is restricted to a certain percentage of the loan which again depends on many other factors related to the asset.
Loans from the Unorganised Sector
Loans from the unorganized sector may come quite easily and without any credit checks. However, they may not be the safest places to borrow from due to a host of different reasons like undue harassment, predatory rates of interest, etc.
Availability of no credit check loan is not a rare occurrence anymore. It is easily available, however we would like to advise you to focus on your credit score as well as certain loans like home loan or education loan are available only through the traditional lenders which require a good credit score.