Millions of consumers use payday loans as a means of getting quick cash. Billions of dollars are borrowed every year using this method of lending. Although this method of lending is without a doubt, very popular, the fact remains that the cost of using it is very high. That high cost and other problems is the main reason why many financial experts are not so convinced that taking out a payday loan is a smart option financially.
Payday Loan Popularity
Despite the voices raised against payday lending, there are still a great number of users who are still willing to use it. They have no problem about looking at the other way and ignore the risks that are involved when it comes to payday loans. One of the main reasons why people are willing to forget the risks involved with payday loans is because of the lack of credit check when applying for one, as advertised by the lenders.
What the Lack of Credit Check Means
Most people are aware of the credit system and so they would be able to appreciate how important the lack of a credit check for many borrowers. People with bad credit are unable to get low interests when taking out loans and in cases where the credit is really bad, they are totally unable to borrow at all. Most lenders run a credit check in order to determine the creditworthiness of a consumer when someone is applying for a loan with them. Those with bad credit can therefore forget about getting good deals when it comes to loans.
So when a loan is offered that does not require a credit check, it is not surprising that a lot of people would be interested in it. A lot of people now have bad credit standings, which disables them from using other financial products. The recent financial crisis also caused a lot of people to lose their jobs and also to lose their income. That in turn has caused their credit scores to go down. That’s why there are so many consumers who are ready and willing to get their hands on a loan that would not do a credit check on them.
Is a Payday Loan with No Credit Check a Fact?
The fact that a payday lender does not run a credit check sounds like a great deal, but is that really a fact? Could there be a catch somewhere?
Most payday lenders charge high interests for the loans that they give out. In fact, the interests that they charge are some of the highest in the lending industry. Cash advance lenders claim that the high interest is what they get in exchanged for taking the risk of lending to high risk borrowers, or those with bad credit. But the reality is a bit more complicated. While payday lenders do not use the same method of credit check that traditional lenders rely on, they have their own methods. Most payday lenders use Teletrack in order to check the creditworthiness of consumers applying for loans with them. So what is Teletrack?
Traditional lenders usually rely on the three big credit reporting bureaus, these are TransUnion, Experian and Equifax. But payday lenders do not use them at all. Normally they resort to checking with Teletrack instead. Teletrack is also a credit reporting system but that is where the similarities end. Teletrack is focused only on subprime credit. Subprime credit refers to loans that are made to people with bad credit scores. It is not surprising therefore that payday loans would use Teletrack to check the subprime credit history of a consumer.
Characteristics of Teletrack
While most people are aware that the big credit reporting bureaus are keeping records of their credit, they are not aware that Teletrack is doing the same in a different manner. Banks and other traditional lenders are never known to use Teletrack as a means of checking. Payday lenders, credit unions and even some illegal lenders are the known users of this method of checking consumer credit. There are several characteristics of Teletrack which sets it apart from the other forms of credit reporting system.
Lack of Credibility
There is no question about the credibility of the big credit reporting bureaus, TransUnion, Experian and Equifax. This credibility is what allows lenders to trust them when they provide the information on a certain consumer. The same thing could not be said for Teletrack. This lack of credibility is the reason why many lenders do not rely on it.
Illegal Lenders Use it
Illegal lending is still around and it is a big business. Even illegal lenders must do some checking on the people who are borrowing from them and to do that they rely on Teletrack. Even reputable payday lenders are staying away from Teletrack now. Part of the reason why Teletrack has low credibility is because of its association with illegal lenders.
Reports on Subprime Credit
We have mentioned that Teletrack only reports on subprime credit which renders it useless for major loans and for borrowing of big amounts.
How Payday Lenders Use Information from Teletrack
Like traditional lenders, payday lenders are also in need of information about the people who are borrowing from them. The thing is that they really do cater to consumers who are struggling with bad credit. That is their market, but you could see their problem. The information that they can get from the big credit reporting bureaus would be useless to them. It is irrelevant to payday lenders if you have been missing payments on your credit card debt or if you defaulted on your car loan and the vehicle was repossessed. What payday lenders want to know is if you have defaulted in paying payday loans in the past or if you have tried to use fraudulent information before when getting a loan. That’s the kind of thing that they want to know about you and Teletrack can provide them with that information.
What Information Can Teletrack Provide
There are different types of information about you that Teletrack can deliver. The most important thing for lenders is to know whether you have used payday loans or anything similar to it in the past. If you have used a “no Teletrack” payday loan then it would not appear there. The current loans that you have or if you are “renting to own” anything will appear on their records. Teletrack will also show if you have any payday loans that were charged off in the past. It can also show if the information that you have provided with the lender matches with the data that you have given on any of the current or past loans that you have.
No Credit Check Payday Loans
In effect, payday lenders that claim they do not run any credit checks are not telling the truth or at least a great part of it. No lender would give money to a consumer without making sure first that there is a good chance of the loan being repaid. Payday lenders rely on services such as Teletrack . Even in the cases of no Teletrack loans, they have some way for checking the credit of a borrower.
No Teletrack Payday Loans
You might have seen the websites of payday lenders promising that there is “no Teletrack” with them. Does that mean that they are not doing any checking on the borrowers? As we have mentioned, that is not the case. But you might want to check that again. Some websites might say “No Telecheck,” and that’s completely different story. Telecheck is another company and it watches over checking accounts instead. Some lenders advertise that they do not run checks using Telecheck hoping that you would not notice that there is a difference.
Turned Down for a Payday Loan?
If you were turned down for a payday loan then you might be wondering about the reason why. The approval rate for this kind of loan is quite high so if you don’t get approved then there must be something wrong. You might be wondering about the cause of the rejection since you were promised that there was no credit check. Then there must be something wrong with your record on Teletrack that’s why your application was turned down. You have to find out what their records about you say and make the necessary disputes for corrections.
Remember that lenders provide them with information regarding how you handled your loans. They would know whether you missed payments and sometimes the information could get messed up. You might have heard about how there are many disputes when it comes to credit histories of consumers, Teletrack can have some problems like that.
If you know that you have some problems in connection with payday loans in the past or some other subprime credit and you need cash right away, then you better find a payday lender that offers “No Teletrack” loans, but you should remember that they will still be doing some checking in some other way.