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The Ultimate Guide on How to Get a Loan With No Credit

Are you part of the 44 percent of the population with no or low credit? Are you at a loss as to how you can get a loan?

Contrary to popular belief, it is possible to borrow money even if you've never used credit before.

Read on to learn more about how to get a loan with no credit.

What is a Credit Score?

First things first, let's clarify what a credit score actually is.

Your credit score is a number that is determined based on the number of accounts you have open and your history of making payments.

Your credit score ranges from 300 to 850; the higher it is, the better.

The method that credit bureaus use to evaluate your credit is known as the Fair Isaac Corporation, or FICO, method.

When determining your credit score, credit bureaus look at the following aspects:

  • The promptness with which you pay your debts
  • The amount of money you've borrowed
  • The duration of time your accounts have been open
  • The combination of all of your credit cards
  • Your frequency of using new lines of credit

A higher credit score will help you borrow larger amounts of money, get lower interest rates, and increase your chances of getting approved for a loan.


How to Get a Loan with No Credit

If you haven't built up any credit, there are a few different ways you can go about trying to get a loan:

Look for a Credit Builder Loan

Some lenders will give you what is known as a credit builder loan.

With this type of loan, a lender will let you borrow a small amount of money, but they won't give you that money up front. Instead, it is deposited into a savings account. Every month, you will make a payment on this loan.

The lender will report your on-time payments to credit bureaus, which allows you to build a credit score.

Work with a Credit Union

Credit unions are typically more willing than banks to work with people who don't have any credit.

The National Credit Union Administration has also created a program known as the Payday Alternative Loan program. Under this program, federal credit unions will allow you to borrow anywhere from $200 to $1,000 for a period of one to six months.

Many private and state credit unions also offer similar programs.

Get a Co-Signer

If you have a family member or friend who has good credit and trusts your ability to repay a loan, you may want to consider asking them to be a co-signer on your loan.

$1000 Loan for Poor Credit

When you have a qualified co-signer on your side, a lender will base your loan terms on their credit score.

While you get the benefits of using their credit score, your co-signer is equally responsible for repayment of the loan. This means that if you default on or are late with your payments, their credit score will be affected.

Consider Peer-to-Peer Lending

Another option is peer-to-peer lending. There are several online platforms that allow you to borrow directly from an individual instead of from an institution.

To use these platforms, you'll post a loan listing indicating the amount you want to borrow and what you need the money for. An investor will then review the listing and contact you if they want to fund you.

Having a good credit score increases your chances of getting a loan this way. But, individual investors have more leeway when it comes to deciding whom they'll loan money to. So, you might be able to make a case for yourself and have more success than you would with a regular lending institution.

Use Caution with Payday Loans

If you're in a bind and need money right away, you might also want to consider a payday loan. You'll more than likely get approved right away for a payday loan, even if you don't have any credit. But, there are a lot of risks attached to these kinds of loans, so you need to proceed with caution.

Payday loans typically come with very high interest fees, so they're an expensive way to borrow money, even though the loan amounts are usually quite small.

Payday lenders also, in most cases, don't report your payments to credit bureaus, so they don't help build your credit.

If you do end up going with a payday loan, be sure to pay it back on time to avoid losing a ton of extra money to interest.

Consider Building Your Credit First

While you can get a loan with no credit, it's easier to build up your credit before applying. If you have the time, give these tips a try to start building your credit:

Get a Secured Credit Card

A secured credit card is backed by a cash deposit that you make upfront. That deposit will serve as your line of credit. If you make payments on time consistently, you'll eventually build up a credit score and qualify for an unsecured card.

Become an Authorized User

If a family member or significant other is willing, you can become an authorized user on one of their cards. This allows you to build credit without getting a credit card yourself.

Be sure to come to an agreement with the person who is making you an authorized user on their card. Figure out how you're going to pay for the charges you make and follow through.

Look into Rent-Reporting Services

You can also utilize rent-reporting services to build credit by paying your other bills on time. Rent-reporting services take bills like your rent or utility bills and put them on your credit report. This helps you build a positive credit history without getting a loan or credit card first.

Maintain Good Habits

Whether you get a loan or work on building up your credit in another way, it's important to practice good habits that will help you get a higher credit score. Some of these habits include:

  • Making 100 percent of your payments on time (this includes all bills, not just credit accounts)
  • Keep your credit utilization low -- don't let your debt exceed 30 percent of your credit limit
  • Don't open too many new accounts at once
  • Keep your accounts open for as long as possible

Be sure to also check your credit report regularly to find out if there are any errors or discrepancies that could negatively affect your score.

Want to Learn More?

Now that you know how to get a loan with no credit, do you want to learn more about managing your finances and improving your credit score? If so, check out our other blog posts today!


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Material Disclaimer:

By using poorcredit.org you agree to all of our terms and condition and privacy policy, see below. We make no attempt to solicit financial products. We are a publisher and not a lender or financial advisor.
All loan terms are between you and the lender that may offer you short term credit. We have no access to the interest rate, loan duration, payment amounts, or annual percentage rate (APR). Not all lenders are able to offer you the amount you request. Annual percentage rate may be dictated by the laws of the state where you reside. This may limit your ability to access credit. All lending decisions are made by lenders, not us. Read all terms and conditions provided by the lender prior to accepting a legally binding loan agreement. 
Short term credit is not a long term financial solution. It should only be use in an emergency until a less expensive option is available. Void where prohibited. 
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Consumer Financial Protection Bureau
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