With declining credit score and high debt to income ratio, the prospects to borrow more turn murkier. There are not many credit options left for you. Whether you are searching for bad credit loans, loans for unemployed people or personal loans without a guarantor you need to be extra careful to protect your score.
Many times, the process of searching rare deals bring more harm than good to the borrower. Whether you use a professional advice or DIY by reading online guides, it is important to understand how your credit score is affected when you make a loan query.
Hard credit check
Every time you apply for a loan, the lender makes a query to a credit bureau regarding your credit score and credit history. This is called hard credit check. The hard checks are reported on your credit information report. Too many hard queries hurt your score.
Soft credit check
While applying for a loan it is important to ensure that only soft credit check is initiated by the broker/lender.
However being a person with the low score it would not be easy to persuade the lender to make a soft query. A loan broker can, however, help you get a soft credit check loans.
A broker would typically run multiple queries with several lenders and ensure fast loan search. All this would not affect your credit score as they would ask the lenders to make a soft credit check.
Many loan sharks are also active in the UK. When you make direct to lender query there is a risk of contacting a loan shark. With broker by your side, you could rest assured of dealing with a legitimate lender. As brokers deal with lenders every day, they deal with authorised and regulated firms.
Why is a credit check important?
According to Financial Conduct Authority, no lender can extend loans without a credit check. A credit check helps lender know about the risk involved with a loan application. They gauge the probability of successful repayment of the loan with this credit check. The rate and terms of loans are also determined only after the credit check.
However several lenders use marketing gimmicks and claim that they offer no credit check loans. You should stay away from such sham claims as it is not legal to offer no credit check loan in the UK. The credit check also helps you know if you could successfully repay the loan on time.