When you apply for credit – whether a credit card, a personal loan, a car loan, a line of credit or a mortgage – the lender will usually check your credit history before deciding whether to lend to you. Your credit file contains personal and employment information, details of credit you are currently paying off and your credit limits, any credit applications you have made, as well as any missed payments, defaults or bankruptcies you have in your name.

By checking how you’ve dealt with credit in the past, and how well you are dealing with it now, a lender can decide how much of a risk you are. If you have bad credit or no credit, the lender may deem you to be high risk. This may mean your application is denied, or approved with higher interest rates.

This is why many people with bad credit or no credit choose to apply for credit that doesn’t require a credit check.

What is No Credit Check credit?

As you may conclude from the name, No Credit Check credit is simply credit that doesn’t require a credit check. In Australia, No Credit Check credit is limited to payday loans. While other countries offer No Credit Check personal loans and No Credit Check credit cards, they are not available in Australia.

We will go into the pros and cons of paydays loans and the new pay on demand apps in Australia, but in the meantime, what are your other options if you want to apply for credit, but you have bad credit or no credit?

Payday Loans

Payday loans are one of most common choice for people with bad credit because they allow you to borrow a set amount of money on the condition that you will pay it off when your wages come in.

While the focus on wages means that your credit history is less of an issue, these loans often have high fees and interest rates that work against your finances.

A loan from nimble.com.au, for example, you need to be working to be eligible. Say if you need to borrow $1,500, you’ll pay an establishment fee (up to 20% of principal) of $300 and a monthly fees (up to 4% of principal) of around $240.

There is no mention of your credit history and minimum loans start from $300.

These rates are on par with those of other payday lenders, highlighting just how expensive it is to choose this type of financing.

⚠️ Warning about Borrowing

Do you really need a loan today?*

It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:

• For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
• Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
• If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94

The Government’s MoneySmart website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.

Get help with finances at Credit24 with their different loan offers and be approved within a day. T&Cs apply. Get offer	Apply and be approved of Jacaranda’s different loan offers with flexible terms in 60 seconds. T&Cs apply.
Credit24 Short Term Loan	Jacaranda Finance Personal Loan
Max Loan Amount: $2,000 Establishment Fee: 20% Monthly Service Fee: 2-4% Interest: N/A Terms: 6-12 months	Max Loan Amount: $15,000 Establishment Fee: Maximum $990 Monthly Service Fee: Maximum $24 Interest: 17.95% to 27.95% p.a. Withdrawal Fee: $0 Max Repayment Period: 36 months

With Beforepay you can access up to $2,000 of your pay for a 5% fixed fee. To decide your limit, Beforepay will securely connect with your bank to see your salary details.

Beforepay

Max Wage Amount: $2,000 Transaction Fee: 5% Interest: N/A Terms: Up to 4 cycles

Credit Cards

If you do not have many debts to deal with and are earning a reasonable income, applying for a basic credit card could be a good option. Try looking for credit cards with no frills, low minimum income requirements, and if possible, low interest rates.

A card like the ANZ Low Rate for example, requires an annual income of just $15,000 p.a., so you have a better chance of approval than you would for, say, a card requiring a minimum income of $40,000. It has a $58 annual fee, and a purchase rate of 12.49% p.a. (variable).

Another credit card with a minimum income requirement of $15,000 p.a. is the St George Vertigo credit card. This award-winning card has a low purchase rate of 13.74% p.a. (variable), a low annual fee of $55, up to 55 days interest free on purchases, and currently, 18 months 0% balance transfers.

Requiring a slightly higher minimum income of $40,000 p.a., the HSBC Low Rate Card could also be a good option. It features a purchase rate of 12.99% p.a. (variable), $99 annual fee, and up to five years interest free on purchases at more than 1000 participating retail outlets.

If you have little or no credit, consider the ANZ First Credit Card. It has a minimum income requirement of $15,000 p.a., and a low annual fee of $30. Keep an eye on your revolving debt with this card though, as it attracts a rate of 19.74% p.a. (variable) on purchases. It is basic enough to help you build up your credit history and credit rating.

No-interest, monthly fee credit cards are emerging in Australia as an alternative to credit cards and “Buy Now Pay Later” schemes. Learn the differences and whether or not they’re right for you.

Personal Loans

Personal loans are another option some people turn to when they need money for certain expenses.

Unlike credit cards, personal loans have a start and end date and often a fixed repayment amount.

Not only does this make it easier for you to budget for the financing, but it also means lenders may be more focused on your income than your credit history.

Basically, if you earn enough to manage your current expenses and personal loan repayments, this option may be worth looking into.

Building Better Credit

If you have already applied for a credit card and been declined, then you may be better off salvaging your credit history before applying for any kind of financing.

Lenders, after all, will only let you borrow money when they can see you are able to pay it off – which actually benefits you by reducing the chances of serious debt when you want quick money solutions.

While your income will go some way towards showing lenders you can afford a credit card or loan, your history with payments is a big factor as well.

Bad credit is often seen as a Catch-22 situation: if you have bad credit it is hard to get a credit card, but without a credit card (or loan) you can’t improve your credit.

Contrary to this view, there are ways to improve your standing that do not involve credit cards or bank loans, including:

• Appliance rental contracts,
• Debt consolidation,
• Secured loans,
• Store cards (read more about store cards here).

These types of options will help you improve your overall financial standing and show all lenders that you are taking steps towards becoming more responsible with money management.

In the meantime, if you desperately need money for immediate costs, you may want to consider negotiating a payment plan or requesting a loan from a family member or employer. You can even draw up a contract so that it is all kept professional.

There is no doubt that bad credit is limiting for your financial options, but focusing on long-term improvement will help you make the best decisions and have even more choices in the future.

Photo source: Shutterstock