Do Tax Refund Advance Loans Require Credit Checks? Contractor Curious

I researched this extensively last month on several tax prep websites. Most refund advance loans (RALs) don't require traditional credit checks because they're secured by your anticipated refund. According to the NerdWallet 2024 tax prep comparison, companies like H&R Block, TurboTax, and Jackson Hewitt offer advances with 'no credit check' prominently advertised. However, they do perform a soft verification through databases like Telecheck to check your banking history.

I got a refund advance last year. No credit check happened. They verified my ID. They confirmed my banking details. The money arrived within 24 hours. The amount was limited to $3,500. My full refund was over $6,000. The remainder came later. No interest was charged. But I paid for premium tax preparation.

I tried getting an advance on January 28th this year, but got denied because of some issue with my previous banking history. Called the IRS on February 4th and waited on hold for 2 hours and 17 minutes before giving up. Then on February 10th, I tried Claimyr (https://youtu.be/_kiP6q8DX5c) and got through to an actual IRS agent in about 30 minutes who explained there was a flag on my account from a previous year that was causing problems. Are these services really worth it when there could be underlying issues with your tax situation? I'm not convinced.

These advance loans are much less about your credit than they are about the tax preparer's confidence in your refund amount. Unlike personal loans where your repayment ability is the focus, these are more like buying your refund at a discount. Have you considered how this compares to simply e-filing and waiting? For many people with straightforward returns, the IRS direct deposit comes within 21 days, which might make the advance fees unnecessary.

I want to share a warning about these advances. First, check if you qualify for the advance based on your filing status. Second, understand that most services require you to pay for their highest-tier tax preparation package. Third, calculate the true cost by adding preparation fees to any advance fees. Fourth, be aware that if your actual refund is less than expected, you may still owe the difference. Fifth, read all terms carefully as some advances are actually high-interest loans disguised as "convenient services." I learned this the hard way when my refund was adjusted down and I still owed the full advance amount.

I think there might be some confusion about what these companies are actually checking. They may say "no credit check" but they're still evaluating risk somehow. I'm wondering if they're looking at your tax filing history or maybe checking other databases. Has anyone noticed if they ask questions about previous filings or employment verification?

The distinction between different types of refund advance products is important to understand. There are no-fee refund advances (RACs - Refund Anticipation Checks) and interest-bearing refund loans (RALs - Refund Anticipation Loans). The former typically don't use traditional FICO scores but may utilize alternative verification methods like ChexSystems or TeleCheck to assess banking history. The latter might incorporate more traditional credit criteria. Are you considering a specific tax preparation service?