Credit checks are good!
Posted on: 04 November 2015
Every so often we encounter a lender that tells us they won’t do a credit check. You could think, “This is Great! My chances of getting a loan just got much higher!
But it’s a trap! You should never borrow from a lender that does not do credit checks. Credit checks are actually used to PROTECT borrowers! They prevent lenders from giving out loans that borrowers can’t afford to pay back. You can think of credit checks like guardrails on a porch – they let you know that there’s danger ahead and keep you from falling over!
Lenders that don’t do credit checks often give out loans to borrowers that can’t pay them back. But what does this mean for you? Higher prices! That’s right, for every bad loan that a lender gives out, that’s a higher price they need to charge all their other borrowers. If you want to learn why this happens, you can check out our previous post on how lenders determine their prices: Why does it cost so much to borrow money
In summary, credit checks are good for two reasons: 1) They protect us from getting trapped in loans we can’t pay back, and 2) help us get a better rate for our loan!
You should never take out a loan from a lender that does not do credit checks. In a future post we’ll look at what you can do if a lender does turn you down.
As always, if you have any questions about this post or just question in general please email us at firstname.lastname@example.org. We’re here to help answer your questions!