What "no credit check" actually means
When lenders talk about a credit check, they usually mean a hard inquiry: a formal request for your credit report from Equifax or TransUnion that gets recorded on your file. Most of the payday lenders we work with don't do this. A payday loan is small and short, so what matters most is whether you can repay it from your next paycheque.
"No credit check" doesn't mean no checks at all. Every licensed lender still verifies who you are and confirms your income. Some also run a soft check. Knowing the difference helps you avoid lenders who use the phrase to cover for skipping the rules altogether.
Hard vs. soft credit checks
| Hard check | Soft check | |
|---|---|---|
| Affects your credit score | Can lower it by a few points | No effect |
| Visible to other lenders | Yes, for several years | No, only to you |
| Typically used for | Mortgages, car loans, credit cards | Pre-approvals, identity checks |
| Used by most payday lenders we work with | No | Sometimes |
Applying through Options Credit doesn't put a hard inquiry on your file. If a lender ever needs one, it has to ask for your consent first.
What lenders look at instead of your credit score
- Regular income from a job, a pension, or government benefits such as CPP or disability payments, depending on the lender.
- Your pay schedule, so the due date can line up with your next deposit.
- Recent banking activity, including how often your account goes into overdraft or has returned payments.
- Other payday loans you currently have. Many provinces limit or prohibit taking a new loan while one is outstanding with the same lender.
Bad credit, bankruptcy and consumer proposals
A low score, old collections or a discharged bankruptcy usually won't stop an application on their own. Lenders care more about what your bank account shows now than what happened years ago.
An active bankruptcy is different. Most lenders can't approve you until you're discharged. If you're in a consumer proposal, some lenders will consider you, but check with your licensed insolvency trustee first, because new debt can affect your proposal.
Will a payday loan help build your credit?
Usually not. Most payday lenders don't report on-time payments to Equifax or TransUnion, so repaying on schedule won't raise your score. But if a loan goes unpaid and is sent to a collection agency, that can show up on your report and lower your score.
If rebuilding credit is your goal, a secured credit card or a credit-builder product from a bank or credit union will do far more than a payday loan. Our financial education hub explains how.