Understanding The Business Behind 'No Credit No Problem'

If you have spent any time shopping online, you have probably seen a number of ads that promise you increased spending power even if you have bad credit. "No credit no problem" or "No credit check required" are often the terms used to lure customers in. While a healthy level of skepticism is always a good thing, companies are able to offer these kinds of no credit needed offers as a legitimate business practice.

Bank Support

One of the ways businesses benefit from offering these kinds of enticements is because there is enormous support from the financing industry. The person with perfect credit who gets the lowest APR is not the person who makes the lender the most money. It is the person with marginal credit - the person who has not yet established a good credit history or is desperate to repair bad credit. The borrower with the less-than-perfect history is charged higher interest rates because of the risk they pose to the lender. As a result, the lender profits.

In-House Credit

Many businesses, particular those in the rent-to-own category and check cashing companies, function as lenders. They offer a solution to people who cannot get regular credit by charging more rates and fees than is typically allowed for the market.