Advice For Getting A Loan When You Have No Credit History

June 2024credit score indicator

Whether you’re just starting out or haven’t had to make payments on anything yet, it can be difficult to get a loan without an established credit history. The good news is that you can secure a loan when your credit history is non-existent. The bad news, though, is that it will be more challenging. The following advice can help you navigate the complexities of getting a loan sans credit history.

The weight of a credit history

You may be wondering why credit history is so important in the world of loan applications. Basically, it helps a provider decide whether they should approve your loan and how much they will loan to you. It shows how good you are at managing your money and making payments on time. The stronger your credit history, the more attractive you are to lenders, meaning you’ll have fewer problems in securing a loan.

“A lack of credit history won’t necessarily stop you from getting a loan, but the options available to you are likely to be more limited and you may only be able to borrow a small amount,” according to Rhiannon Philps, writer for

Alternative histories

Without a credit history, some lenders may accept different forms of financial history instead. These could be things like your income, banking data or rental payments. Be aware that you may still need a “fair” credit rating and will most likely be charged a higher interest rate to cover the increased risk from the lender.

Collateral proof

Do you have something of value you are willing to hand over to a lender to get a secured loan? Items such as a vehicle, a bank account, stocks, collectibles, etc., may be assets worthy of approval from a lender in lieu of credit history, according to Clint Proctor, writer for Of course, this type of transaction comes with both benefits and negatives.

“In addition to more lenient credit requirements, secured loans may also offer better interest rates or terms. But the downside is that your collateral will be at risk if you miss a payment or default,” he adds. “Make sure you weigh the pros and cons of a secured loan before you take one out. And try to steer clear of predatory title loan or pawn shop lenders that can place you on a financial treadmill by charging exorbitant rates.”

Ways to build your credit

One of the easiest ways to start building credit is to get a pre-paid or credit-builder credit card. You’ll not only have access to the funds you need, but with responsible money management and on-time payments, you’ll be able to cultivate a credit history, says Philps. “Credit builder cards will usually come with a low credit limit, so it’s important to clear your outstanding balance in full each month to avoid high interest charges,” she adds.

You can also add your name as an authorized user to a family member’s credit card, or add your name to your monthly energy, cell phone or streaming service bills. As long as those accounts are paid for in full and on time every month, you will start building a good credit history.

Before you approach a lender, apply for a loan, or sign on the dotted line, be sure to thoroughly research your options. If you ever have any questions about building credit or about loans, contact a Personal Banker at any Waukesha State Bank office.