If you have a poor credit score then you may struggle to borrow – but what if you have no credit history at all? Often, it can be more difficult to get accepted for a loan if you don’t have any experience with debt than if you have a lot of it. However, it’s not impossible. Even if you don’t have any credit history there are still lenders who can find a way to lend responsibly so that you can start to build a positive credit record.
How to get a loan with no credit history
There could be many reasons why you don’t have any credit history. It may be that you’re only just old enough to make an application for a loan. Or you may have had no reason to borrow money up until now. If that’s the case then you won’t have a credit history. Your credit history is what lenders look at when they are making a decision about an application for credit. There are three main credit ratings agencies in the UK – Experian, Equifax and Call Credit – and these organisations hold credit data that they make accessible to lenders. Through these files lenders can see specific information about an individual, including:
- If that person has existing debt and, if so, how much
- How credit has been managed in the past e.g. if someone has borrowed and then fully repaid that borrowing
- Whether someone has missed payments on other types of borrowing
- Legal action that has been taken against a borrower, such as a County Court Judgment (CCJ) as a result of not sticking to a previous credit agreement
All this information will influence whether a lender is willing to approve an application so if it’s not there it can be tricky to convince a lender that you’re credit worthy.
First time loans
If you haven’t borrowed before then you may still be eligible for first time loans. A credit history isn’t the only factor that a lender will take into account when it comes to deciding whether to approve an application for first time loans. Other factors that may also have an influence include:
- Your employment status e.g. whether you are employed/self-employed/unemployed
- How much you earn
- Any dependents
- Whether you have made an application for a first time loan in the past and been refused
- Your residential status e.g. living with your parents/renting/homeowner
- The support you have e.g. if someone is willing to guarantee your loan for you then a lender may be more willing to lend
First time loans have a lot of advantages. Not only will they give you access to essential finance that you can use for any purpose but they also help you to start creating positive credit history. If you have positive credit history then you will have access to a wider range of different lending products in the future and you are also much more likely to get better rates. This means borrowing will be cheaper and also easier to do.
How to get a personal loan with no history
It’s not impossible to get a personal loan even if you don’t have a credit history. Borrowing now will help you to start creating a positive credit history – all you have to do is make sure that you make repayments on the loan on time and pay off the loan in full. Getting that first personal loan can make all the difference to having access to better borrowing in the future, so how do you do it?
- Find the right lender. Not every lender offers personal loans for people who don’t have a credit history. It’s essential to ensure that you apply to a lender who can provide you with finance that is suitable for what you need.
- Make sure the loan will be affordable for you. Lenders today often carry out affordability checks to ensure that you will be able to make the payments you agree to. You can work out how much you can afford to borrow by budgeting i.e. how much income do you have and what will be left from that after you have covered your monthly outgoings as well as the loan repayment.
- Choose the right loan. Personal loans come in a range of different options – shop around to make sure that you are applying for the finance best suited to you.
What are my options with no credit history?
If you don’t have any credit history then it’s a good idea to start building one. Your options include:
- Guarantor loans. A guarantor – with a good credit history – guarantees to the lender that you will make payments on the loan so that the lender is willing to approve your application.
- First time loans. Some lenders have created loans specifically for anyone who is a first time borrower e.g. students and young people.
- Secured loans. Your credit score isn’t as important if you have an asset, such as a car, against which the loan can be secured.
- Payday loans. If you’re employed then you may be able to borrow a payday loan to start generating positive credit history.
It’s not impossible to find a personal loan if you don’t have any credit history. Borrowing now could be the first step towards making it easier to be approved in future.