This is a collaborative post by Louise about personal finances.
image source: https://unsplash.com/photos/xoU52jUVUXA
There are many reasons you might not have a credit score. You may be one of those students who recently moved to the US from abroad and haven’t had the opportunity to build a credit profile yet.
On the other hand, there is a great chance you may prefer to pay for things with a debit card or cash and you’ve really never asked for a credit card. Not having a credit card doesn’t necessarily mean that you’re financially irresponsible. Simply put, many people with no credit are very creditworthy individuals.
There may be times in your life when you need financial support. However, if you’re just starting out, it can be difficult to get a personal loan with no credit. To help you delve through that hazy period when your credit file is thin, we discuss how to get a personal loan with no credit check, the options you have, whether a no credit check personal loan is a smart move, and alternatives worth considering.
Can I get a personal loan with no credit?
Theoretically, it is possible to apply for a loan no credit check. But if you want to get a loan with no credit score, you got more chances to be hit with a high-interest rate and less-than-satisfactory terms. As with everything about the financial world, your lack of credit score scares lending companies. Normally they would use a tool to decide whether or not you’re likely to pay them back is either absent or too thin to tell them what they need to know.
These are some of the reasons you may nor have a steady credit score yet:
- You haven’t used your credit card in the past three years. Typically, lack of credit activity halts the information credit bureaus need to generate a precise score.
- You’re a young adult who hasn’t had the opportunity or time to build a credit score yet.
- You’re a recent immigrant, just starting out, and must build a credit score from scratch.
Lack of credit score isn’t the same as having a poor credit score. Contrary to many inexperienced beliefs, when the lending companies tell you you have no credit score, that simply means that there is no record of how you will actually behave as a borrower. Personal loans for those with no credit are borrowing options explicitly intended for borrowers who don’t have a rich credit history.
That said, getting a loan with no credit can be tough but not impossible. Even if you have credit, the credit score necessary for personal loans can get a little confusing. No matter if you need a loan to finance your new pool, buy a new car, or a personal loan to help cover an emergency situation, a steady credit history is a key to opening the credit door.
Are there any options available if I have no credit?
Let’s say you’re in desperate need for a personal loan with no credit card. You’ve borrowed your cousin’s RV, are vacationing in the mountains, and the RV breaks down. You don’t have an idea what’s wrong with it, but you’re pretty sure there’s going to be an expensive repair in the future. Your finances are limited right now, and you don’t know where you will find the support to get the vehicle up and running again. Applying and qualifying for an emergency loan, as we’ve previously mentioned, is not easy, but it is possible. However, to obtain a loan with no credit, it pays to know all your options.
Credit Unions and Banks
If you have no credit history at all, you may be shocked by your ability to get a personal loan with your credit through your credit union or home bank. As long as you have an established rapport, a credit union or a bank can easily pull up your account to check things like how frequently you make deposits, if you spend more than you bring in, and generally, how wary you are with your account. It might not be a credit score, but it provides them with a sense of how likely you act as a borrower.
If you plan to apply for a personal loan in the near future, you should consider joining a credit union. Credit unions offer some of the best terms and lowest interest rates across the country. Not only that but if you’re a member, credit unions or banks tend to be more likely to assess your loan worthiness by utilising information outside your credit score.
Family and friends
Your family and friends will be among the first people to find out that you will need help to get a loan if you have no credit. The family understands if you haven’t had the time to build your credit history. If you find yourself in a pinch, ask for help from those who actually care about you.
If your family agrees to lend you money, try to deal with it as you would with any loan. Make an agreement outlining:
- How often you will make the payments
- Amount you are borrowing
- How much the payment will be
- And when you will pay the loan in full
Try to stick with these agreements. There’s nothing worse than losing the confidence of someone kind enough to come to your rescue.
Consider a co-signer
If someone in your family happens to have a terrific credit score, you could ask them to become your co-signer on loan. A co-signer will improve your chances of being approved for a loan. It also improves the likelihood you will score attractive repayment terms and low-interest rates. If every on-time monthly is reported, it will help you build a positive credit history. But if you miss a payment, it’s your co-signer who’s on the hook. To put it simply, you will owe it to your co-signer to make all the payments as promised.
