Not having a credit history can make borrowing money complicated. Lenders rely on credit scores to assess how trustworthy a borrower is when determining their eligibility for a personal loan. If you have no credit history, there’s no record of you repaying debts, so lenders are likely to see you as a greater risk. That doesn’t mean there’s no hope though.
Consider a secured loan
Secured loans, where you pledge an asset as collateral, can be more accessible for individuals with no credit history. Offering collateral like a vehicle or another valuable asset can reduce the risk for the lender because they can just claim the asset in the event of a default.
Secured personal loans often have lower rates than unsecured because of this. If you have no credit history, but can provide proof of a steady income, offering up something as security might just get your application over the line.
You do run the risk of losing your collaterised asset if you default, so again, it’s important to only take on loans you are confident you’ll be able to afford.
Get a personal loan with no credit check
The most natural option to consider when you have no credit history is a personal loan with no credit check. These loans are designed for people with a poor credit score or limited credit history, and can approve you without checking your credit history.
No credit check loans don’t mean guaranteed approval. Your lender will probably still want to check things like your income and employment stability, so you might need to offer up documents like pay stubs, tax returns, and bank statements.
There are some providers who guarantee your loan application will be approved, but you should be wary about this because that’s a pretty tell tale sign of an irresponsible lender.
The downside is no credit check loans often mean higher interest rates and fees to compensate for the higher risk the lender is taking.
Build your credit history
While it can take time, building your credit history is one of the best ways to improve your chances of being accepted for a personal loan. There’s a few ways you can do this. Of course, making sure you pay all your bills on time goes without saying, but you’ll also need to take on loans to demonstrate you can repay them.
Since the introduction of comprehensive credit reporting in the 2010s, having no credit history isn’t necessarily a red flag, but a bad credit history probably is.
You might be surprised to know things like paying your electricity bills on time, as well as your postpaid phone plan, can reflect positively in your credit history.
Apply with a co-signer
Having a co-signer with an established credit history can significantly improve your chances of getting approved for a personal loan. A co-signer or guarantor agrees to be responsible for the loan if you fail to make payments, so typically a close friend or family member.
Lenders are more likely to lend to you if they have confidence your co-signer will be capable of repaying the debt. If you do default though, the burden of the loan falls to your co-signer, which can affect their credit history, so caution is important.
Explore alternative lending options
Major banks typically have more stringent lending criteria, which can make it tough to be accepted for a loan if you’re a bit of an unknown entity or if you’re self-employed.
Alternatively, it might be worth looking into some alternative ways for a loan. Peer-to-peer (P2P) lending is one example.
P2P platforms connect borrowers with investors on the site who give out loans. Typically online platforms, you could go on there and try to find someone willing to lend you money without a credit history.
These platforms might do a credit check, so you still might not be accepted, but it’s worth exploring to see if you can find a lender who is satisfied you aren't too much of a risk.
Be aware that if you opt for an alternative lending platform, the interest rates could be higher, because you are a higher-risk borrower.
