When it comes to taking out a loan, it makes sense that lenders want to look at a borrower’s credit. After all, credit scores provide them with valuable insight about how loan applicants manage – or mismanage – their finances. A FICO credit score takes into account a borrower’s payment history, outstanding debt, and credit mix, as well as the length of their credit experience and how recently they’ve entered into new debt.
These factors tell a story about the borrower and help lenders determine whether or not a borrower might be considered either a risky or a safe bet. Those with the worst scores might not even qualify for a loan, and if they do, they’ll be charged more. Meanwhile, those with the best scores will get the best rates and encounter fewer roadblocks when accessing credit.
When a lender performs a credit check, it’s known as a “hard” credit check. The fact that a lender checked a borrower’s credit is noted on the credit report where it will remain for up to two years. While it’s reasonable for lenders to run a credit report, the very act can adversely affect the borrower’s credit score. What’s more, each subsequent hard credit check can erode the score further.
For borrowers shopping for a new loan, hard credit checks are a legitimate concern. For example, if a borrower applies for several new credit cards in a short time period, followed by an application for a business or personal loan, those multiple hard credit checks could signal to the lender that the borrower might be a risk. The lender may think the borrower is racking up too much debt or is running low on cash. Because hard credit checks can adversely affect credit, it’s smart to limit the number of inquiries lenders make, especially if you’re planning on taking out a new loan in the near future.
Whether you’re actively working on improving or maintaining your credit score or have bad credit, no-credit-check loans are an attractive alternative. Kensington Financial Associates’ loans are secured by the cash value of life insurance and do not require a hard check on your credit. Your existing credit will not affect the rate you pay, and the loan itself is not reported as debt on your FICO report. Kensington offers competitive rates, and you can book these loans to your business, too. Best of all, with the online application and process, obtaining funding is hassle free.
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