How to get a loan with no credit

Getting almost any loan without a credit history can be a challenge, according to the Consumer Financial Protection Bureau (CFPB). You may have some options, though. Learn more about how you may get a personal loan without an established credit history. Plus, learn about alternative ways to borrow money when a personal loan isn’t an option.

What you’ll learn:

• Having little to no credit history can make borrowing more difficult. But it doesn’t automatically mean a personal loan is out of reach.

• In general, personal loans are relatively small unsecured loans that allow borrowers to spend as they see fit.

• Building credit takes time, but starting now could help in the future.

• When used responsibly, secured credit cards, secured loans and credit-builder loans can be used to build credit.

Lending decisions are up to individual lenders. So you may be able to find a lender that will approve you for a personal loan even if you have no credit history. There just may be fewer options. And the loans you’re eligible for may charge higher interest rates and fees.

Having no credit history means that the major credit bureaus, Experian®, Equifax® and TransUnion®, have no record about how you’ve managed credit. 

Not having a credit history doesn’t mean you have bad credit or are financially irresponsible. The CFPB refers to this situation as being credit invisible or unscorable. You might also see it referred to as having an insufficient or thin credit file.

Someone can be credit invisible or unscorable for a number of reasons, like when they have: 

1. No history of applying for loans or credit cards: Examples could include a younger person on their own for the first time or someone who just moved from another country.

2. Credit accounts with no recent activity: The CFPB calls this a stale file. If no activity has been reported within six months of a credit score being calculated, that could affect scoring. 

3. Credit accounts that are closed: This is another example of a stale file. For example, getting married, on its own, doesn’t affect your credit. But if someone who used to have their own accounts closes them after getting married, that could affect their credit.

4. Credit accounts opened too recently: There are a lot of factors that play into timing, but the CFPB explains that it can take at least six months for a new credit account to be scorable.

5. Credit history that isn’t being reported: There are multiple credit bureaus that compile credit reports. And there are multiple credit scores and scoring models. If their credit activity isn’t reported, a person may be unscorable. 

Having little to no credit history can make borrowing difficult. But being credit invisible doesn’t automatically mean a personal loan is out of reach.

Personal loans are offered by all sorts of lenders, including banks, credit unions and peer-to-peer (P2P) lending sites. Many advertise these loans as relatively small, unsecured loans that allow borrowers to spend as they see fit. That means lending decisions aren’t backed by collateral like loans for a house or a car typically are. 

But there may be secured options. Plus some loans, such as title or payday loans, may have additional risks or be more expensive. So be sure you fully understand the terms of any loan agreement before making a commitment.

The required credit score for a personal loan varies. Each lender can set its own requirements, meaning some may offer loans to people with no credit.

If a personal loan doesn’t seem possible now, there may be other ways to borrow money. Some might even help you build credit if you practice responsible habits like making on-time payments every month.

You could become an authorized user on the credit card account of a trusted family member or friend. While you’ll be able to make purchases with your card, the primary cardholder is ultimately responsible for all the charges made on the account. Becoming an authorized user could build your credit if you both use the account responsibly and that activity is reported to the credit bureaus. But negative actions could hurt both of your credit.

It could be beneficial if you can take the time to build good credit before you apply for a loan. You might find you’re offered more choices and better rates.

To see where you stand, you can get copies of your credit reports from the three major credit bureaus at AnnualCreditReport.com. 

You can also monitor your credit with CreditWise from Capital One. It lets you access your credit report and credit score as often as you like. Plus, the built-in CreditWise Simulator can help you see the possible effects of taking out a personal loan. It’s free for everyone, and using it won’t hurt your credit scores.

Here are the answers to frequently asked questions about getting a loan with no credit history:

Getting a loan without an established credit history can be challenging, but it’s not impossible. If you’re unable to qualify for a personal loan, there are alternatives. For example, you might consider a credit card designed for those with less-than-perfect scores. Check out Capital One’s credit cards for fair and building credit. You can also see if you’re pre-approved without affecting your credit scores.