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Do Online Title Loans Require a Credit Check?

Online Title Loan Credit Checks

A frequent question related to getting an online title loan is “do online title loans require a credit check”? The answer is not a simple yes or no; although based on the way some title loan companies advertise it is not surprising that many consumers would think the answer is no.

The truth is some online title loan companies do require a credit check, and some do not. It is very possible to get an online title loan with no credit check.

Title Loan Advertising – Credit Check Related

It is understandable that many borrowers would think that title lenders never check credit. Online title loans are often advertised as “No Credit Check” loans.

This is somewhat true depending on how you define credit check. Additionally, it is not uncommon to see ads for title loans with the phrases:

  • “Bad Credit Ok”
  • “No Credit Check”
  • “Any Credit Accepted”
  • “Your Car is Your Credit”
Bad Credit Ok
Common Advertising includes “Bad Credit Ok” and Similar phrases.

The truth is while there may be some title loan companies that do not perform any type of credit check; many title loan companies will perform what is know as a soft credit inquiry. This is yet another reason why finding the best title loan company is important.

While it is possible to get a no credit check title loan, many lenders will perform a soft inquiry. To fully understand whether or not online title loans require a credit check we need to further define credit check.

What is a Credit Check?

While this may be starting to get confusing, it is important to define what is a credit check and what is not. There are two types of credit checks, a soft inquiry and a hard inquiry.

These are very different and understanding both of them is critical to understanding what many title lenders means by “no credit check”.

Credit reports can be pulled in various ways.
Credit Reports can be pulled in various ways.

Hard Inquiries

The first type of credit check is a hard inquiry. This is where a lender pulls your credit history to evaluate whether or not to approve a request for a loan. This is a formal request for credit and requires your permission.

Lenders, including title lenders, cannot perform a hard inquiry without your permission. Additionally, these inquiries remain on your credit report for two years. They do affect your credit score. A large number of hard inquiries on your credit report will likely lower your credit score.

Hard inquiries are very different from soft inquiries. When a title lender says no credit check, they are most likely referring to a hard inquiry.

Soft Inquiries

A soft inquiry is when a lender pulls your credit history, and possibly credit score, to evaluate your fitness for a loan in general. It is not tied to a specific loan request and does not affect your credit score.

Common soft inquiries include credit card companies and other lenders. These types of inquiries do not require your approval. As mentioned they do not affect your credit score.

Online Title Lenders and Credit Checks

Many online title lenders will perform some type of credit inquiry. Typically it will be a soft inquiry unless they notify you and ask permission to perform a hard inquiry.

Remember, a hard inquiry requires your permission so read anything you sign very carefully.

Are there No Credit Check Title Loans?

There are some lenders that do not perform any credit inquiry whatsoever. While the majority do perform a soft inquiry, not all do. It is possible to get a title loan with no credit check.

Also, sometimes the reason for the soft inquiry has more to do with verifying the information you provided than it does with evaluating your credit history.

The vehicle is used to secure the loan, so credit scores are not nearly as important as they would be for unsecured loans. While there are indeed some title lenders that do not pull any kind of credit report at all, the most common is a soft inquiry.

Credit Scores are not Important
Credit Scores are not necessarily Important for Online Title loans.

No Hard Inquiry Title Loans

The better question then perhaps is “Are there no hard inquiry online title loans?”. The answer is yes; many online title loan companies perform a soft inquiry only.

Some do perform a hard inquiry, but like we mentioned they need your permission to do so. If you do not want your credit checked then simply decline to give the lender permission to do so.

Why do Lenders perform a Soft Inquiry?

Considering the fast that title loans are secured loans you may be wondering why lenders would need to pull any type of credit report. The answer is simple: to verify information.

This is especially important for completely online title loans with no inspection. For these loans the lender never sees the borrower or the vehicle in person.

This adds risk and to help mitigate this risk the lender uses the documents submitted with the application, combined with a soft inquiry.

This is done to verify details including address and identity. Because the loan is secured by the vehicle the lender does not use the credit inquiry for loan value determination, but rather to make sure the information provided by the borrower is accurate and truthful.

Conclusion

Do online title loans require a credit check? The truth is that some do and some don’t. In reality, most lenders will perform at least a soft inquiry.

Make sure you understand the difference between a hard and soft inquiry. A hard inquiry may affect your credit score, so only approve the lender preforming one if you are serious about moving forward with the loan.