Creditworthiness Checks: Process, Protection, Our Approach
Representative example: Borrow £700 for 6 months. 1st monthly repayment of £168.45, 4 monthly repayments of £224.60, last monthly repayment of £112.20. Total repayment £1,179.05. Interest rate p.a. (fixed) 185.39%. Representative APR 611.74% Our APR includes all applicable fees. Daily interest is capped at 0.798%
Warning: Late repayment can cause you serious money problems. For help, please go to www.moneyhelper.org.uk
When you apply for a payday loan in the UK, lenders perform a “creditworthiness check.” This involves checking your credit history through your credit report to assess your history of loan repayments and your ability to pay back the new loan.
However, if a lender performs only a standard hard credit check on your credit report, it can negatively impact your credit score. Each “hard check” leaves a mark on your credit record, potentially lowering your overall credit score. Other lenders can also see the log of this hard credit check.
In this article, we’ll demonstrate why our credit check process is safe and will not damage your credit score. Additionally, we’ll inform you about the various types of credit checks conducted by payday lenders and detail the process, ensuring you have a comprehensive understanding.
The Importance of Soft Credit Searches
A “soft credit search” is like a sneak peek into your credit history. When you apply for a loan, this type of check allows a lender to access your credit report without leaving any trace or log on your credit report.
When you apply for a payday loan with us, we start with a soft search. It won’t harm your credit score, even if your loan application gets declined. Soft searches help us determine how much you might be able to borrow without impacting your credit history.
Full Credit Checks
A “full credit check” is a comprehensive examination of your credit history, including your payment history, outstanding debts, and other financial details. The lender requesting the check is noted in your credit report, which other lenders can see
A hard credit check can affect your credit score for at least 12 months. Each hard credit check can decrease your credit score by up to five points, according to FICO.
Only after completing a soft credit check and confirming that we can approve your loan do we proceed with a full credit check. This isn’t just something we want to do – it’s actually required by regulations set by the FCA (Financial Conduct Authority). But here’s the thing: when you reach this stage, you’re already approved for the loan. The full credit check is more of a formality.
Footprints on Your Credit File
When we do a soft search on your credit report, it will not leave any mark on your credit file. Only when we are certain we can approve your loan, after a complete review of your credit history, do we proceed with a full credit report. Our ‘hard credit check’ will be logged in your credit history, and it stays there for about a year.
Credit Reference Agencies We Use
We work closely with credit reference agencies, like TransUnion. They hold information about your credit history. So, when we do a credit check, we’re looking at your history, such as whether you’re on the electoral roll or how much credit you owe. This helps us figure out if you’re a good fit for the loan you want.
Red Flags in Credit Reports
Some things in your credit report can raise concerns for us and other lenders. If you have lots of credit lines or if you have co-signed for someone else’s debt, that debt shows up on your credit report too. Also, if you’re only making minimum payments on your debts, that’s a sign you might not be able to handle more. These are all potential red flags to us that you might not be able to afford to repay the loan, and as a responsible lender, we are committed to not approving a loan for you that we believe will put you under undue distress.
Your Credit Score
You’ve probably heard of a “credit score.” It’s a number that credit bureaus give you that tells the lender how trustworthy you are with money. Most lenders use this credit score to make lending decisions based on your previous credit and lending history. The higher your score, the better. It means you’re less risky, and you get better loan offers.
But payday lenders are different. Payday lenders are more interested in other aspects of your credit report than just the overall credit score.
As a payday lender, we have custom underwriting criteria. This means you can apply for a loan with us even if you have a bad credit score, as your primary credit score is not the only factor we consider when evaluating your creditworthiness and loan eligibility.
If you’ve borrowed from us before and paid back on time, you get some extra benefits. You can borrow more money, and you’ll have a faster application process. But remember, you’ll still have to go through some checks by law, but we do take into account your previous loan repayment history to help us confirm if we can re-loan to you easily.
It’s tempting to apply to many payday lenders when you need money. But be careful. If lenders do hard credit checks, it leaves a mark on your credit report, and each hard check can reduce your credit score by up to 5 points. Too many marks can make lenders hesitate to give you a loan.
Applying with us is a really safe way to see if you qualify for one of our payday loans without negatively affecting your credit score.
Besides the creditworthiness check, we conduct an affordability check. Read our article on affordability checks for more information about this process.