No credit check loans: what they really cost

Most payday lenders skip your credit reports and scores, and they generally do not verify that you can actually pay the money back. Instead, some turn to specialty credit reporting firms. These firms gather details about your job, your transactions, and how you have repaid past loans.

Because payday loans usually go unreported to the three major credit bureaus, they normally do nothing to build your credit.

A handful of specialty bureaus provide information to short-term lenders:

• Clarity Services gathers payday and installment loan records, and Experian owns it.
• DataX tracks payment history on payday and installment loans, and Equifax owns it.
• FactorTrust, which is owned by TransUnion, serves lenders working with nonprime borrowers and short-term products.
• Teletrack provides information to payday lenders, and Equifax owns it.

You can ask each of these bureaus for one free report every 12 months.

No. According to the FTC, legitimate lenders do not guarantee you a loan before you apply. No fee can guarantee approval, and any pitch offering credit "regardless of your credit history" points to a scam.

If an ad promises approval, be careful. If a site asks for money upfront to secure your loan, that is a warning sign the FTC describes, and paying a fee never guarantees a loan.

In some states, payday loans from unlicensed lenders may be void. Confirm the lender holds a license in your state before handing over any personal information.

Even small amounts come with the same steep payday loan costs. The usual fee is $15 for every $100 you borrow, which works out to nearly 400% APR.

If you qualify, a credit union payday alternative loan could cost much less. Amounts range from $200 to $1,000, repayment runs 1 to 6 months, and the APR cannot exceed 28%. The NCUA consumer site points to 36% APR as the benchmark for affordable credit.

When you need money fast, it is easy to say yes to almost anything, and that is understandable. A title loan is worth a closer look: a typical one is about $700 at roughly 300% APR, due in about 30 days. Among single-payment title loan borrowers, 1 in 5 end up losing their vehicle.

Here is an example, not a real person. Jo has little credit history and sees an ad saying "guaranteed approval, no credit check." At about 300% APR, Jo's $700 title loan would cost roughly $173 in interest over 30 days. CFPB data shows that 1 in 5 single-payment title loan borrowers lose their vehicle. By contrast, borrowing that same $700 through a payday alternative loan, where the APR is capped at 28%, costs far less. Even with "no credit check" in the ad, the lender will likely still pull Jo's report from a specialty bureau such as Clarity, DataX, FactorTrust or Teletrack. Be wary of anyone asking for an upfront fee to guarantee approval: paying a fee never guarantees a loan.

A low credit score does not tell you whether a payday lender will approve you. Payday lenders generally do not use traditional credit scores, though some use specialty reports.

Start by asking a credit union about a payday alternative loan, since its APR stays capped at 28%.

Fast online decisions do not mean nobody checked anything. Some lenders still review a specialty bureau report. Payday lenders generally do not verify that you can afford repayment, so it becomes easy to take on more than you can manage at nearly 400% APR.