No FICO Financing or No Credit Check Loans and Credit Cards
Although not as commonplace as they once were, there are still lenders offering loans and credit cards to customers without a credit check. These credit lines are sometimes termed "no FICO financing," because borrowers can get the loan without a high FICO score.
Unfortunately, while there are legitimate credit cards offered to people with no credit check, such offers are also popular with con artists and other scammers looking to cheat people out of their money. Spotting the difference between a real No FICO credit card offer or loan and a fake No FICO credit card is not easy, but applying good personal finance skills will help spot the frauds.
Legit No Credit Check Offers
There are many reasons why a lender would be willing to offer a No Credit Check Required loan or credit card program. Many young customers have not yet established credit, for example. For banks and credit unions, offering a No FICO loan program to their customers can be a good way to build customer loyalty from people who may feel thankful that their bank was willing to take a chance on them. Finally, for some lenders, offering a no credit check required credit card or loan is simply a profitable endeavor because they charge higher interest rates on such lines of credit.
The keys to spotting real No Credit Check loan offers from the scams is a combination of financial savvy and a little real world common sense.
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First, no lender, and I mean absolutely NO legitimate lender, ever offers credit to everyone without exception. Scammers prey on the desperate who need to believe something that they should obviously know is suspect. Thus, fraudulent No Credit Check Required loans are often advertised with lines that sound like, "Anyone, regardless of credit history or bankruptcy, can qualify for a big loan with this special program."
Does that even make sense?
Never forget that borrowing money is a two-ended transaction. For everyone who borrows money, there is someone who lends the money. Both parties have to feel there is a benefit (correctly or not), otherwise, why would they go through with the transaction?
For lenders, the point of lending money is to make a profit by charging interest as the loan is paid back. The reason lenders usually want a credit score pulled or do a credit check is because in order to make money, the loan has to get repaid. People who have borrowed money and paid it off in the past are the most likely to repay the loans or credit cards they get this time, while those who have a history of not repaying the money that they borrow are more likely to not repay the loan again this time.
In order for it to be worthwhile for a lender to offer a no credit check loan or credit card, there has to be something in it for them to make up for the fact that by offering such a loan, they are likely to have more people than usual not repay the credit line in full. There are only a handful of reasons that make such an offer worthwhile.
The most common reason for offering a No FICO Score loan is to charge a higher interest rate. If the lender can charge a high enough interest rate that the profit made from the people who do repay outweighs the losses from the people who don't repay, then they still make a profit. However, this also means that anyone who has even a marginally good credit score will get a much better deal by getting a traditional loan.
The other reason a lender might offer no credit check loans is to build customer relationships. The interest rate will still be higher as well. However, it might not be as high. Spotting these offers is easy; these relationship building loans require a relationship. Basically, these loans will only be available to customers who have some kind of business relationship with the financial institution. For example, such loans may only be offered to existing customers. In other cases, they may be offered to non-customers, but in exchange, you must open an account with the bank.
Keep a sharp eye out for loans that appear to have no strings attached. Would you lend money to someone you didn't know, with no strings, without checking up on them even a little? Of course, not. Neither would professional lenders.