By Lara Adams / Updated: Nov 4, 2019

How to Override the Credit Check

Guaranteed Loans: How To Override The Credit Check

The recent digital innovations concerning the lending market determines more and more people to appreciate the convenience and time-saving features of the fast loans.

These circumstances lead to an overall attention switch from traditional loans taken from banks, to the type of loans that are granted overnight and based on minimum information provided by the applicant.

Are the Guaranteed Loans a Reality?

In fact, more and more people are searching for “guaranteed loans” to meet their financial needs in a fast and easy way.

These are usually the persons who either are in a very urgent need of money, have a bad credit which makes them not eligible for applying for a traditional loan through their bank, or who simply appreciate the speed and the convenience of such loans.

Tip In reality, guaranteed loans are not “guaranteed” by default. The applicant is anyway subject to some kind of checks and assessments.

Let’s make things clear by further analyzing how the entire crediting decision works and which are the factors that lead to a positive answer from the lender.

Understanding the Math: How Does a Credit Check Impact Your Loan Application?

A credit check is a check that some lenders will perform on your credit score before deciding whether or not to give you a loan.

Who and When can Check Your Credit History?

Generally, your credit history can serve as the most significant source of information when taking the decision to approve a loan. The reason for that is that, in many cases, history does tend to repeat itself. The inquiries on your credit history will usually depend on several factors.

The Loan Type

Not every type of loan is subject to a credit check. Generally, the higher the loan amount – the higher the probability that the lender will run a credit check. As a rule, payday loans won’t involve checking your credit, while a mortgage application, a personal loan or a business loan will.

The Lender

Not all lenders will run a traditional credit check. Banks tend to have stricter credit policies and procedure that will most probably involve checking your credit score along the way. On the other hand, the wide variety of online lenders, credit unions, alternative crediting institutions might have a business model in place that allows them to grant loans without running a credit check.

What Will Your Credit Score Show to the Lender

If you have previously borrowed money from banks, credit institutions, or other lenders in the past and then made all your minimum payments before paying off your debt, you’ll be fine.

If the opposite is true and you fail to pay back debt according to loan arrangements you’ve made, you can expect that the lender will increase the interest rates, or that you will be turned down by the better lenders.

Basically, your credit score is determined by how well you’ve been able to pay back debts in the past. Credit bureaus collect credit data and make it available to lenders when they need to consider whether or not to provide a loan.

Why Is A Credit Check Important For Lenders?

Your credit history is a signal about your ability to repay a loan and give the lender his money back. The world of loans is fairly unforgiving, and lenders are cold as per the requirements for their job.

If you’ve managed to take out several loans and always pay them back as per each individual agreement, then you will likely pay back the next loan you take out. Unfortunately, the opposite tends to be true as well.

When Your Credit Score Serves as a Reason for a Loan Refusal

Technically, when a lender turns you down, they are supposed to tell you the reasons for doing so. In practice, they might not disclose the credit score they used in determining your creditworthiness, but they are at least required to provide the name and address of the credit bureau from which they acquired the score.

There is a reason for all this. Having the ability to secure a loan is critically important. So, once a lender turns you down because of a bad credit score, overriding a credit check can be the next option of getting that loan. But, please, don’t rush.

Fortunately, given the wide variety of lenders on the market, there will always be a way for you to get a loan. A bad credit score doesn’t necessarily need to pose restrictions for you to access the loans market. Though, it still should act as a warning sign for you.

Is There A Way To Override A Credit Check and Still Get The Loan?

So, let’s say the Lender has performed a credit check and saw that you hardly qualify for it in terms of credit. Maybe you have a bad credit, maybe there are some other factors that impact the crediting decision. Is there a way to override this situation?

Yes, There Is a Way to Override a Credit Check, BUT…

The short answer is yes. Yes, lenders can override a credit check to help you get a loan, but IT IS NOT always the best or easiest option. There are three ways to go about an override, and they always depend on the lender:

      • Discretionary overrides,
      • Compensating factors, or
      • Selective Overrides.

Discretionary Override

Discretionary overrides are overrides that take place because of a loan officer’s decision. There are several reasons for which a loan officer would decide a loan should be overridden. There doesn’t even need to be a quantifiable problem in many cases. These kinds of overrides are highly subjective.

Compensating Factors

Overrides based on compensating factors tend to be far less subjective than their discretionary counterparts. The compensating factors that can lead to an override are generally more consistent and quantifiable.

Compensating factors, by definition, are factors that offset a component of a credit transaction. One example would be a change in your employment situation. If you had a job and lost it, causing your loan to be declined, this would be an example of a high-side override.

Compensating factors need to be clear and quantifiable if you are going to use them for an override. You must consider the changes in risk and profitability that would result from said compensating factors. If the ‘compensating factor’ doesn’t consider risk, profitability, or competitive considerations, it won’t be taken into account. Keep in mind that even ‘unduly subjective standards’ are a good enough reason to override.

Selective Overrides

Selective overrides can occur when it can be proven that a loan was given or denied for an ‘unduly subjective’ set of circumstances. If a lender cites something silly like “she’s a good person” as an argument for granting a loan, then if the next customer can prove it, they can undergo a selective override if it can be proven to a loan officer.

Is the Credit Check Override Worth the Risk?

All these mechanisms intended for forcing a lending decision are applied at the lenders’ level and you hardly have an influence on what is going on there. No matter the result of these overrides, you will be the one who will bear the consequences:

      • If the loan will get approved – this can be a sign that your lender has a higher risk appetite and the loan will be granted with a higher interest rate and it will cost you more.
      • If your loan application will be denied – you will be the one who is going to be left without the needed money.

Are There Particular Mechanisms for Credit Score Overrides?

There are a few ways in which the outcomes of a credit check in the short-term can be overridden. The main ways are:

      • Through credit check overrides, and
      • Policy exceptions.

Both of these are related to a situation where a loan transaction doesn’t follow lenders’ loan policies.

On the other hand, credit check overrides can be further broken down into:

      • High-side override, which occurs when a loan that should be granted under loan policy gets rejected. The same applies when the loan includes stringent conditions that loan policy dictates should be less stringent.
      • Low-side overrides, which occurs when loan policies would normally dictate rejection of the loan, or that more stringent requirements should be placed on it, but the lender grants it anyway. In this case, should the lender waive the stricter terms and conditions placed on your loan, an override may be on the table.

Basically, any loan that doesn’t follow loan policy can be overridden, but that depends on the lender’s discretion and on the extent your loan is breaching their internal loan policies. While this might serve as a celebration reason for you, receiving a loan based on a forced credit decision on the credit score criteria should be treated with care, as it can further impact your ability to successfully repay this particular loan.

You’ll maybe ask yourself what can you do on your part to override a credit check. The available instruments are timely debt repayment and working towards improving your credit score. Yes, both are long-term strategies, but at least they won’t put an additional burden on your personal finances and on your financial security.

Works Cited

1 Consumer Financial Protection Bureau “My Credit Application Was Denied Because of my Credit Report. What can I do?”

2 Premier Insights Blog “A Overview Of Loan Policy Exceptions And Overrides”

3 KometSales Knowledge Base “Credit Limit Overrides”

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