How does a credit check work?
One of the crucial financial screening methods for potential loan applicants is a credit check. Not only is this process relevant for payday loans, but it is also very important for other types of financial aid.
Essentially, it is the thorough evaluation of your financial data and your personal information that allows lenders to make the right choice. Although prison sentences can be imposed for non-repayment of the money owed, it is in no one’s interest to enter into an embarrassing loan agreement.
This is why financial institutions and lenders perform a credit check for a corresponding assessment of repayment capacity. It is linked to all payday loans and other loans issued by financial institutions. If you’re unfamiliar with the mechanics of how the credit check works, Nick Wilson, the founder of Loan Connection AdvanceSOS service and an expert loan officer will fill you in on the details.
How is the credit check applied?
If you apply for a payday loan or an installment loan, the credit check is done by the lender. It is a perfect way to get an overview of your credit and financial history, personal details and credit score.
Credit score is one of the most relevant factors in this area as it predicts the likelihood of repayment on time. It is therefore a significant element for lenders since it provides information on the person who has requested a loan.
You must be prepared to be contacted by the lender asking for permission to access your financial data. Of course, this is the mandatory aspect of the appraisal and there is no other way to get a loan.
The financial expert will then review your bank accounts and transactions, credit card history, and other details.
Information to which the lender has access
First, the lender will access your details and go through your bank account transactions. As the credit score consists of many data pointers, the lender will have access to all of its elements.
Thus, the lender can verify the following information:
- Bank account details
- Transactions made
- Checking account details
- Loans previously contracted
- Amounts of borrowings contracted
- Credit card information
If you don’t have a working bank account, the lender will usually look at your checking account. All data on previously closed accounts and cards will also be visible during the check.
After giving your confirmation to start the process, it may take up to a few days for the lender to verify all the details. On the other hand, it is not so uncommon for the lender to verify all available financial information for security.
A credit check is the only way to truly confirm the customer’s ability to return the funds on a designated date.
How is the credit score determined?
From the moment you apply to borrow money through loans, your credit score is assessed by the lender. A wide range of factors can add up to the credit rating assessment, and this primarily relates to financial details.
However, even other unrelated aspects can affect the credit score balance. One of the things that are under review is your personal information. If the information is not readily available, the lender may be suspicious.
That is why it is good to request the electoral inventory because the personal data will then be at your disposal. It is also an excellent method of confirming private data since the electoral library is trustworthy.
Other factors that affect credit rating are past loan transactions and amounts. Also, if you apply for multiple loans at the same time, it negatively affects your credit score.
If you are unable to repay your loan, you may face legal action, so a credit score check is good for both parties. It gives insight into your reliability to the lender, while confirming to you that you can really afford the loan.
Credit check related to payday loans
Barring exceptions, the credit check is mandatory to obtain a personal loan. Those who apply for the loan without proper credit check can be taken to court. It is therefore also in your interest to allow your financial data to be examined.
Although your credit score must be high to qualify for the loan, payday loans can be granted even if someone has a relatively poor rating. This is more about reliability than just reviewing your previous transactions.
In all honesty, your financial information from a few years ago can’t really hurt your chances of getting the loan. If you’ve made the effort to improve your credit score, chances are you’ll get the loan.
Payday Loans Credit Rating Assessment
When it comes to strictly evaluating your credit rating, the lender will look at several aspects. First, the lender must confirm your identity and personal details. This is why you will need to submit a voting list in case your information cannot be confirmed otherwise.
A credit score is not the game changer when it comes to getting a payday loan. It is more of an insurance on the loan side that you can repay the borrowed funds.
It is mainly based on providing your data and information on previous loans. If your credit score confirms that you can return the funds on time, your payday loan will be secured. It usually takes no more than a day for the lender to check your credit score.
Some cases have shown that you can expect to receive the cash instantly as soon as the credit score evaluation is completed. Payday loans are, after all, short-term loans, which means that lenders must prove the reliability of their repayment through the credit score.
Story of Amanda Girard. Girard is AdvanceSOS’ top financial writer. She has helped the company grow and expand its reach to customers over the past three years. She holds a master’s degree in finance and has been a seasoned writer for over five years.