Loans for People With No Credit History

by Jason Reeher

Overview

Especially if you are young or have never had credit, getting a loan can be difficult. Building credit takes time, yet you can qualify for a loan without a credit history if you know where and how to look.
Basics

Banks and other financial institutions need to limit risk. Therefore individuals with no credit history may not qualify for single-signer loans, since part of the criteria for a loan is a minimum credit score.

Significance

Overcoming a lack of credit history means giving the bank a reason to lend to you. The most significant way to do this is to have a cosigner, or a creditworthy relative who is willing to sign for the loan with you.
Effects

If you can get a cosigner, you will build your credit profile as you pay back the loan. Building a solid repayment history will boost your credit score, which means that the next time you borrow you may be able to do so on your own.
Strategies

If you do not have a willing cosigner, you can consider a secured credit card. Secured cards grant a credit line in exchange for a small cash deposit as collateral. As you use the card and make payments, the bank reports your payment history to the credit bureaus, building a credit score.
Considerations

If you have no credit profile, you have an opportunity. After all, many people are saddled with too much debt and a low credit score as the result of poor financial planning, whereas you have a clean slate. Consider your first attempt at gaining credit as a step toward responsible personal finances.