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Lenders check credit history before issuing any loans to borrowers. So, how do you access credit if you do not have any history of credit? This is especially when you need a personal loan and not financing for a given purchase. With a personal loan, you can finance almost anything you like. However, the Consumer Financial Protection Bureau (CFPB) requires borrowers to have a good credit history to get financing with ease.
With a credit history, you have access to various loan options. Otherwise, you will have to look for online loans with no credit check. A credit history is a record of how you manage your debts. It captures both your past and current debts, especially in the last six years. This information is vital in preparing your credit score and report that lenders use to determine your creditworthiness.
Loan Application without No Credit History
It is quite difficult for anyone to access loans with little or no credit history. Most important to note is the fact that having no credit is not synonymous with having poor credit. Poor credit rating is due to financial mistakes and failure to pay pending bills and debts in good time. However, having a thin or insufficient credit report can be because of the following reasons:
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Little or lack of recent activities on a person’s credit accounts, especially within six months leading to what is known as a stale file.
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No history of credit card or loan applications. This mostly applies to young people starting on their own or people that moved in from a different country.
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Unreported credit history leading to insufficient information for quantification
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Closed credit accounts. This usually happens in such cases as when a married person combines accounts with the spouse.
If you do not have a credit history or there is not enough information in your credit history, borrowing can be challenging. However, that does not automatically make you illegible for a loan application. You have a few options to consider getting back on track and accessing loans like any other person.
Can you get a Loan with no Credit?
Personal loans are given based on creditworthiness. Therefore, seeking approval for loan applications with no credit may be difficult. However, there are loans available for people with no credit. Here are the options you have:
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Personal Loans. Some lenders can risk giving you loans with no credit. The only challenge is that they have higher interest rates than normal personal loans for people with good credit history. Therefore, the cost of borrowing for people with no credit is high.
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Use a Co-Signer. It may be difficult to get a loan without a credit history. However, you can use a co-signer with good credit to access loans. A co-signer provides guarantee and security for the loan because you have no credit report to show. That means they will pay off the loan in case you default.
Using a co-signer is a great idea. However, you must establish mutual trust in this engagement to avoid negative actions that could negatively affect your credit files.
If you need a loan without a credit history, getting a high-interest personal loan and using a co-signer are probably the two options you got. However, you can choose to wait and start building your credit report. Once your credit is good, you can qualify for better and more affordable loans.
A sure way to build credit is to start making timely payments every month. This will not happen overnight. You will need to continue practising responsible habits for some time to be in good credit standing. Keep monitoring your progress and ensure that you have no pending bills and debts each month.
Final Thoughts
Accessing finances to borrow for investment is a welcome thought for anyone. Nonetheless, your ability to borrow depends on your creditworthiness as seen in your credit history report. If you do not have a credit history, it will be a challenge to access loans. However, that does not mean you cannot borrow money. You can use choose to apply for loans with high interest or get a co-signer for security. All the same, the lasting solution is to build your credit to access loans without stringent restrictions.
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