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How Does A Credit Check Work?

A credit check is the financial check taken by lenders when you request a loan or need to borrow money. The lender uses this as an essential part of the loan request process. The check helps the lender determine whether you will be able to afford the loan repayments. By assessing your circumstances and looking…

how-does-a-credit-check-work

A credit check is the financial check taken by lenders when you request a loan or need to borrow money. The lender uses this as an essential part of the loan request process. The check helps the lender determine whether you will be able to afford the loan repayments. By assessing your circumstances and looking at your financial history, a lender can better evaluate whether to approve your loan request.

Beyond this, it is not uncommon to have a credit check when renting out an apartment, taking out insurance, buying a cell phone or even getting a job. A credit check tells a lot about your creditworthiness and ability to make financial commitments on time.

 

How Is A Credit Check Carried Out?

A lender will ask your permission to access your financial information. They can then view your financial transactions and decide whether it looks like you can afford a loan. The credit check is an automatic process, and you will not need to provide the information to the lender.

 

What Can A Lender See When They Carry Out A Credit Check?

In most cases, when a payday lender performs a credit check, they will be able to see your basic personal information, financial history, and current circumstances. A lender can view your full name, date of birth, and electoral roll information, which confirms your current and previous addresses.

You will typically have a credit score, where the higher the score, the better and lenders may have a cut off or threshold with a number that they are willing to lend to.

A credit check gives the necessary financial information to your lender. They can view all loans, credit cards, and mortgage accounts that are open, as well as the start date and loan amounts. All accounts closed in the last six years will be listed. The check will also show all current and joint accounts and any overdraft. Previous loan request searches and footprints may also be included. Importantly, the lender will want to consider any history of Missed repayments or debt, including bankruptcy and CCJs. Information can also be accessed on whether your identity has been used for fraud.

 

What is a Hard Credit Check For a Payday Loan?

A hard credit inquiry is a formal credit check conducted by a lender or financial institution to assess a person’s creditworthiness. When a person applies for a loan, credit card, or other financial product, the lender typically performs a hard inquiry on the person’s credit report. This check will allow the lender access to the person’s complete credit history. This allows them to evaluate the person’s ability to repay the debt.

Hard inquiries can have a negative impact on a person’s credit score, especially if a person makes too many hard inquiries in a short period of time. This is because hard inquiries signal to credit reporting agencies that a person is actively seeking credit, which can be seen as a potential risk factor.

A single hard inquiry may lower a person’s credit score by a few points, but the impact is usually temporary and fades over time. Some payday lenders require a hard credit check, so if you are applying to these lenders, be sure to stick to making one application at a time.

 

How Does A Credit Check Work?

 

What is a Soft Credit Check For a Payday Loan?

A soft credit inquiry is a credit check that does not impact a person’s credit score. Soft inquiries are used for informational purposes and do not involve a person’s application for credit.

Examples of soft inquiries include when a person checks their own credit report, when a lender performs a pre-qualification check to see if a person may be eligible for a loan or credit card, or when an employer checks a person’s credit report as part of a background check. Pheabs only performs soft credit checks.

Soft inquiries are not visible to lenders or creditors and do not impact a person’s creditworthiness. In fact, regularly checking your own credit report through a soft inquiry can be beneficial, as it allows you to monitor your credit score and report for any errors or fraudulent activity.

 

Will I Receive A Credit Check For a Payday Loan?

You will receive a credit check when you submit an enquiry for any loan. It is an automatic part of the loan request process and relates to everyone. In this way, lenders try to avoid the difficult circumstances that can occur when someone can’t afford to meet loan repayments.

A credit check is a mandatory and automatic part of the loan request process for a payday loan. It allows the payday lender to make an informed decision on providing you with the money you need. This does not mean that you will be denied a loan if you have a poor credit score. Pheabs is willing to consider loan enquiries with a range of credit histories. However, a credit check is still always carried out.

 

Can I Get a Payday Loan With Bad Credit?

Yes, you very likely may be able to get a payday loan with bad credit. Payday lenders are often willing to approve a loan even if a borrower has a low credit score. This is because payday loans have high interest rates, meaning the lender assumes less risk.

 

Do Payday Loans Show Up on Credit Reports?

Payday loans may or may not show up on a person’s credit report, depending on the lender and the credit reporting agency. Some payday lenders report to credit bureaus, while others do not. If a payday loan is reported to a credit bureau, it may impact a person’s credit score, especially if they miss a payment or default on the loan.

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