Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
While it can be difficult to borrow money if you don’t have any credit, it’s possible. (Shutterstock)
It’s easier to qualify for a personal loan with an established credit history. But if you don’t have any credit, a lender may still approve you for a loan. Here’s how to get a personal loan with no credit history, as well as some steps you can take to establish and build your credit.
How to apply for a personal loan with no credit history
If you need a loan but you don’t have a credit history, follow these steps:
1. Shop around and compare options
Do some research and find several lenders who focus on factors such as income and employment history instead of just your credit score. Then, compare their interest rates, repayment terms, fees, and eligibility requirements. Some lenders will let you prequalify and check your loan offers without hurting your credit.
Credible makes it easy to see your prequalified personal loan rates from various lenders all in one place, and it won’t affect your credit score.
2. Choose a lender
Once you have a few prequalification offers, read reviews online to get an idea of each lender’s reputation. Then, pick a lender with the ideal loan for your unique budget and situation.
3. Apply for the loan
Most lenders will let you apply for a loan on their websites, from the comfort of your own home. Be prepared to share basic personal and financial information about yourself. You’ll also need to submit documents, including pay stubs, tax returns, and bank statements.
4. Close on the loan
If the lender approves your application, it’ll send you the final loan documents. Review them carefully and make sure you understand all the terms of the loan before signing on the dotted line. You can expect to receive your loan funds via direct deposit shortly after, sometimes as soon as the same or next business day after approval, though funding times vary depending on the lender.
5. Build your credit
Once you’ve received your funds and started repaying the loan, do your best to make your monthly loan payments on time, every time. Your payment history is the biggest factor that makes up your credit score. Having a history of on-time payments on your credit reports will help you build credit and open the doors to more financing options in the future.
How to establish credit if you have no credit history
If you don’t have a credit history, it’s important to establish one. With a high credit score, you’ll find it easier to buy a house, car, or anything else with the lowest possible interest rates. Having good credit can save you thousands of dollars in interest charges over your lifetime. Here are some ways you can establish a credit history:
- Become an authorized user. When you become an authorized user on someone else’s credit card account, you can use it to make purchases and pay it off each month like you would with your own card. If you go this route, make sure the primary cardholder, which can be a family member or close friend, doesn’t carry a high balance and always makes on-time payments.
- Apply for a secured or student credit card. Depending on your situation, you may qualify for a secured or student credit card. With a secured credit card, you put down a refundable deposit and charge purchases on it up to the deposit amount. A student credit card is specifically designed to help students build credit but usually comes with lower credit limits and fewer perks than traditional credit cards.
- Continue to monitor your score. Even after you’ve built strong credit, it’s a good idea to keep tabs on your score on a regular basis. To do this, request a free credit report through the major credit bureaus or a credit-monitoring service. Credit reports will give you insight on whether your hard work to build credit is paying off and uncover any errors that may be present. Keep in mind that it typically takes about six months for your credit score to be generated.
If you’re ready to apply for a personal loan, Credible makes it easy to compare personal loan rates from various lenders to find one that suits your needs.
How can you have no credit history?
Your credit history is a record of how you repay debts and is used to calculate your credit score, which helps lenders evaluate your ability to pay back a loan. Your score is made up of several factors, like:
- Your payment history
- Current unpaid debt
- The number and type of loan accounts you have
- How long your current loan accounts have been open
- How much available credit you’re using
- Any new credit applications
The higher your score, the more likely you are to make your payments and the less risky of a borrower you are in a lender’s eyes. Here are some reasons why you might not have a credit history in the first place:
- You’ve never used traditional credit accounts. Credit reports track your credit and debt transactions. If you’ve never had a loan or credit card before, there’s no information for your credit reports.
- You’re a recent immigrant. If you’re a recent immigrant, you’ll need to build your credit history from scratch. Unfortunately, your score in your home country generally won’t transfer to the U.S.
- You’re young. If you’re young, you may not have had time to establish credit yet. This is particularly true if your parents have helped you financially.
Establishing a credit history doesn’t happen overnight. But if you make consistent, on-time payments and don’t take on more debt than you can comfortably repay, you’ll gradually build your score and boost your approval odds for future loan products.
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