The world is full of opportunities when you have excellent credit. But what steps should you take when you’re first starting out and don’t have a credit history? Here are nine ways to get a loan with no credit.
How to get a loan with no credit history
Perhaps you’ve found yourself in a place where you’re saying “I have no credit but need a loan”. Although a good credit score is important, there are ways to borrow money without credit.
1. Become an authorized user on someone’s credit card
An easy way to get access to credit is to become an authorized user on someone else’s credit card. Doing so gives you access to the card’s credit line to borrow and spend as you please.
The card will show up on your credit report and help you build credit. However, both people involved need to be cautious with this approach.
If the primary cardholder misses a payment or defaults on the debt, it could harm your credit. And since you are an authorized user, in most cases, you have access to the full credit limit available. This means that you could max out the card and leave the cardholder footing the bill.
Also, keep in mind that the primary account holder has the option to remove you from the account. If that happens, you may lose the card’s history from your credit report. So, it’s best to avoid being removed as an authorized user unless your credit has improved.
2. Find a credit card that allows cosigners
While few major credit cards allow cosigners, there are issuers that offer them. Getting a cosigner is different than becoming an authorized user.
You and your cosigner will be joint account holders, meaning you’re equally responsible for the debt incurred on the card. But it also means you’ll both reap the benefits of any positive credit history created with this card.
One drawback is that you don’t always have the option to remove a cosigner after your credit has improved. It’s easier to be removed as an authorized user than it is to remove a cosigner from a card.
Also, since you are joint account holders, your cosigner’s credit could be damaged if you rack up debt or default on the account.
3. Ask someone to cosign on a loan
Another option is to ask someone to co-sign a loan for you. By doing so, you’ll get the benefit of the loan and the opportunity to build your credit.
The cosigner’s good credit history will help you qualify for a lower interest rate and better terms than you would on your own. Some borrowers can’t get approved for a loan without the support of a co-signer. The table below shows lenders who accept cosigners.
Again, though, you and your cosigner need to be cautious with this option. If you fail to make on-time payments, your cosigner will suffer the consequences—this could create tension in your relationship.
4. Get a secured loan or credit card
Secured personal loans provide the opportunity to build credit and borrow money based on the value of the property, cash, or investments. For example, you can borrow against the equity in your home or the value of your investments.
You can receive a secured credit card by depositing money in the bank, which will offer a credit limit related to that deposit.
Some banks even grant a credit limit that is higher than what you deposit. Others will boost your credit limit after you make a handful of on-time payments and manage the card responsibly.
5. Visit a credit union
Credit unions are owned by their members, so they don’t have the same corporate profit objectives of the major banks. They tend to be more flexible with their credit underwriting. Credit unions may also be more willing to look at the totality of your situation, rather than just your FICO score.
6. The shopping cart trick
The shopping cart trick is an easy way to get approved for a store credit card without a hard pull on your credit.
During the checkout process, many online retailers will offer the option to get preapproved for a credit card without checking your credit score. Being so, it’s a popular option for people with bad credit or those looking to establish a credit profile.
Of course, the retailer wants to encourage you to buy more merchandise from them, hence offering an easy credit card approval process. But it can be a great way for you to begin building credit.
7. Get a credit-builder loan
Credit-builder loans, from companies like Self Lender, are different than traditional loans.
Instead of receiving the money immediately, the lender will deposit the funds into a savings account. This acts as collateral in case you default on the loan.
When your loan is paid off in full, you can withdraw the funds plus interest. Your progress is also reported to the credit bureaus, which helps you build credit and improve your score.
Katie Ross, the Education and Development Manager at American Consumer Credit Counseling (ACCC), says, “Credit-builder loans are a great option for an individual to establish credit or rebuild bad credit. These loans get reported to the three credit reporting bureaus, which is ideally what you want to see.”
Because of the way these loans are structured, they’re easier to qualify for compared to an unsecured personal loan.
8. Payday loans and auto title loans
Payday and auto title loans each come with their own set of dangers—you should typically consider these options as a last resort. They do, however, provide a way to get a loan with no credit.
Payday loans are often easy to get. However, they can come with high interest rates and fees that trap some borrowers in a vicious cycle.
With an auto title loan, you are placing a loan against your vehicle, which could cause it to get repossessed if the loan is not repaid on time.
9. Borrow from friends or family
Your friends and family want to see you succeed—and some may be willing to lend you the money to help you get there. If you go this route, formalize the deal with a loan agreement.
And make sure you treat this loan as if it came from a bank. You don’t want to lose a friend or create an uncomfortable situation at family gatherings because you didn’t pay someone back.
Final thoughts on applying for a loan with no credit
Just because your credit isn’t great doesn’t mean you can’t get a loan with no credit. If your low credit score is due to a lack of credit history, you may have more options than you think.
In fact, if you have a low score with a clean credit history, it may be easier for you to get a loan than someone with a higher score who has delinquencies on their report.
So, it’s worth it to see what options are available to you before attempting the steps above. But remember, a hard credit inquiry will hurt your score. So, it’s important to only apply with lenders that offer a soft pull.
A quick and convenient way to do this is with SuperMoney’s personalized loan offer tool.
Rather than applying with each separate lender, you can get preapproved offers from various lenders within seconds—all without hurting your credit score. Whether or not you’re able to get approved, it’s wise to continue building your credit. Not only will a higher score make it easier to get a loan, but you’ll be able to lock in better rates and terms as well.
See what you qualify for today without hurting your credit score.
Lee Huffman is a former financial planner and corporate finance manager who now writes about early retirement, credit cards, travel, insurance, and other personal finance topics. He enjoys showing people how to travel more, spend less, and live better.