Having no credit history can be a frustrating situation.
Many lenders Do not give out loans with no credit.
But in order to get a credit score you need to get a loan, or some other type of credit.
It’s the ultimate catch 22.
In this article we’re going to go over options for people with no credit to get a loan, and ways you can establish and build credit.
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Options for People with No Credit History
To build a credit score you will need at least 6 months of credit history. Whether it be a credit card, personal loan, or auto loan. The problem lies with most credit lines and loans need credit history to get approved.
There are a for options for people with no credit to get a loan. Here are some loans that require no credit check. We will also go over some strategies you can use to quickly build that credit history so you can qualify for all types of loans.
Payday loans are very short term loans for a small amount, usually between $200-$1,000. They act as a cash advance until your next paycheck when the loan is due. While these loans can be an advantage for those who really need it.
They can also start a vicious cycle of needing loan after loan. In the case of a payday loan this is incredibly financially devastating as they have extremely high interest rates as high as 500%.
There are lenders that offer these payday loans with no credit check. However, if you default on the loan it will be reported to your credit report as a negative collection account.
If you don’t have any choice but to get a payday loan you should pay it off as soon as possible to avoid ridiculous extra fees.
Valid Reasons to Get a Payday Loan
- Avoiding repossession of a car loan or foreclosure on a home
- Repair broken down vehicle
- Pay utility bill to avoid disconnection
- To buy food
Poor Reasons to Get a Payday Loan
- Consolidation of debt
- Unnecessary purchases
- Home renovations
Personal loans do require a credit score in most cases. They are available to consumers with bad credit. If you have a 580 credit score or higher you may qualify for a personal loan with some lenders. A personal loan is a short term installment loan, usually paid back in 12-24 months but will come with higher interest rates the lower your credit score.
Get a Co-Signer
If you are in need of a personal loan and you have no credit, you could use a co-signer or co-borrower. A co-signer is an additional loan applicant whose credit rating is used to help the main applicant qualify for the loan.
If you have a close personal friend or family member that’s willing to co-sign for you this could be a very viable option.
Start Establishing Credit
Getting a loan with no credit is no easy task. Even if you’re approved for a loan the interest rate will be sky-high. In order to be able to go to any lender and get any loan you want you’re going to need to start establishing a credit score.
You can start your building credit history right now by doing these 3 strategies
Get a Secured Credit Card
A secured credit card works similarly to an unsecured card but is attainable for people with no credit history. Let’s say you apply for a $300 secured credit card, you will need to send the bank a $300 deposit. You will use the card just like any other regular credit card.
Use it to fill up your tank each week and make the payments monthly. The account will be reported to all three major credit bureaus and will start building your credit history. After a period of 6-12 months you may be able to convert the secured account to an unsecured card and receive your deposit back.
Get Added as an Authorized User
On any credit card account you ha e an option of adding a second person who has access to use the account. When an authorized user is added the entire account history is reported to your credit report, helping your FICO score.
If you have any close friends or family members with a credit card in good standing you can ask them to add you as an authorized user. You do not even need to physically own a card, thus reducing the risk for the account holder.
Get a Credit Builder Loan
A credit builder loan is offered by your local credit union. Credit unions are great because they are more focused on helping their community than any big bank or online lender will.
They work by having a certain amount of money in an account that secures the loan.
For example: If you get a $500 loan, an account will be established to hold your $500 deposit. Once you have completed your installment payments on the loan the $500 is released back to you.
The Lenders Network has the largest network of mortgage lenders that specialize in home loans for borrowers with all types of credit scores. We will match you will the best lender based on your specific situation.