No Credit Check Loans: The Honest Answer

Is there such a thing as a no credit check loan?

Not for an unsecured loan from a regulated lender. The Financial Conduct Authority requires lenders to check that a loan is affordable for you before lending, and for an unsecured loan – one that isn't backed by anything you own – looking at your credit file is part of that. It's there to protect you from borrowing more than you can manage.

What people searching for "no credit check loans" usually want is reassurance that applying won't damage their credit score, or that a less-than-perfect history won't rule them out. On both counts, the news is better than you might think.

The exception: pawnbrokers

Pawnbrokers are regulated by the FCA too, and they usually lend without a credit check. That's because the loan is secured on something you hand over – jewellery or gold, for example – and the amount you can borrow depends on what it's worth. Pay the loan back and you get your item back; if you don't, the pawnbroker can sell it. It's a very different kind of borrowing, and one with a long history: Cheque Centre's high street stores offered pawnbroking in their day.

Getting a quote won't affect your credit score

When you apply through Cheque Centre, lenders first look at your details using a soft search. A soft search:

• can't be seen by other lenders
• doesn't affect your credit score
• lets you compare quotes as often as you like – the FCA encourages people to shop around before they borrow.

If a lender gives you a quote, that's effectively an acceptance. Only if you decide to go ahead does the lender carry out a full, hard credit check – and because it uses much the same information, it's usually just a confirmation of what they've already seen.

Why a hard check, if the soft check already said yes?

It's a fair question. There are a few reasons, but the biggest is that the hard search acts as a marker. It tells other lenders that you've accepted (or want to accept) a loan offer, because it shows up when they search your file.

That matters, because a soft search can't be seen by other lenders. Without the hard search, a lender checking your file now wouldn't know that you'd taken out a loan elsewhere an hour ago. The hard search gives every lender an accurate picture of what you already owe before any money is sent.

Think about the alternatives:

• If every quote used a hard search, simply shopping around would fill your credit file with searches and damage your credit score – so you'd be penalised for comparing deals.
• If only soft searches were used, someone could get twenty quotes, accept them all, and end up with twenty loans in two hours without any lender knowing.

Using a soft search for quotes and a hard search when you go ahead protects you both ways: you can compare freely, and lenders can be sure they're not lending to someone who's just borrowed elsewhere.

What if my credit history isn't perfect?

You may still be able to borrow. The lenders we work with are used to helping people whose credit history isn't perfect, so being turned down by a bank doesn't mean you'll be turned down here. And because getting a quote only uses a soft search, finding out costs you nothing.

A short history of "no credit check" lending

Lending without a credit file is far older than credit files themselves.

• 1872 The Pawnbrokers Act sets out the rules for lending against goods – loans based on what you bring in, not on your history. It stays in force until the Consumer Credit Act replaces it in 1985.
• 1880 Doorstep lending begins in Bradford, with agents who knew their customers personally and called each week to collect repayments. It lasts more than 140 years.
• 1996 to 2003 Credit checks as we know them today weren't commonly used for short-term lending. Instead, lenders like Cheque Centre judge your "status" – face to face, in a branch.
• 2000s to 2013 Online lending takes off, and big lenders chase market share.
• 2014 to 2018 The FCA takes over, and its affordability rules are strengthened in 2018. Lending without proper checks becomes untenable.

Status, not scores

When Cheque Centre opened in 1996, it was competing with doorstep cash lenders, and the checks looked very different. To borrow, you had to show that you'd lived at your address for at least a year, and bring in your last three months' bank statements showing your income. Most employers already paid wages into a bank account; if yours paid cash, your last three months' payslips would do. The lender then made a judgement from what was in front of them.

Applications were made in person, and photo ID was required. The few made over the phone meant faxing your ID across. In many ways those checks were thorough – they were just done by people rather than computers. That's why every advert carried the line "All loans are subject to status".

In our experience, lenders didn't advertise "no credit check" loans either. Doing so would only have attracted the borrowers they least wanted – and before the internet, there were no search terms to compete for anyway.

The market-share years

In our experience, most smaller lenders in the 1990s focused on profit. Through the 2000s and up to 2013, many of the big lenders chased market share instead, because that's what raised their value – and some were bought by private equity investors who prized growth over profit. Investors funded the lending and sold loan books on to other buyers, so lenders were often lending money that wasn't their own.

That's where the idea that "anyone could get a loan" came from. It wasn't really true, but there was some truth in it. Once the FCA took over and lenders had to answer for the loans they'd made, that era came to an end: in 2018 Wonga collapsed under a wave of compensation claims from customers who'd been lent money they couldn't afford.

Could a lender with no credit checks survive?

Imagine a lender that genuinely did no checks at all. From its point of view, things would go wrong very quickly:

• It would attract the riskiest borrowers. Anyone who'd been turned down everywhere else would apply there first – so its customers would be far more likely to fall behind than anyone else's.
• It would be a magnet for fraud. Without identity or credit checks, nothing would stop someone using stolen details, or taking out loan after loan with no intention of paying any of them back.
• It couldn't charge its way out. The FCA's price cap means no high-cost short-term lender can charge more than 80p a day per £100, £15 in late fees, or more than double what was borrowed. There's no room to cover widespread non-payment with higher prices.
• It would run out of other people's money. The loosest lending of the past only lasted while investors were happy to fund it. Once the losses and complaints arrived, the money stopped.

Credit checks aren't just there to protect you. They're what keeps a lender in business – and lenders that stay in business are the ones that can still help you next time.

Myths about no credit check loans

"Checking if I'm eligible will lower my credit score."

Not when you get a quote through Cheque Centre. That uses a soft search, which other lenders can't see and which doesn't affect your score.

"Bad credit means I'll automatically be turned down."

No. Lenders look at your whole situation, including your income and outgoings, and the lenders we work with are used to helping people with imperfect credit.

"Lenders want you to miss payments so they can charge late fees."

No. A missed payment costs a lender far more than it could ever recover, and on high-cost short-term loans, late fees are capped at £15. Lenders want their loans repaid.

"You used to be able to walk into a branch and walk out with cash – no ID, no questions."

Not at Cheque Centre. Even in the 1990s you needed photo ID, at least a year at your address and three months' bank statements or payslips.

"Paying a fee up front guarantees you'll be approved."

Never. Asking for money up front before you get your money is a classic sign of a scam. Genuine lenders and brokers don't do it.

Want to know more? Read about short term loans, or compare all our loans.