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One of the most common questions we hear is: can I get a loan with no credit history? So this week, we’re explaining why it’s more difficult to get a loan with no credit history and what you can do about it.
If you’ve ever found yourself wondering can I get a loan with no credit history? then buckle up because we’re about to whizz through everything you need to know about finding credit, building a credit score and making your life easier.
First of all, the big question: Can I get a loan with no credit history?
The short answer: you can, but it won’t be easy.
The longer answer: your credit score is a calculation of your viability as a borrower. It tells the lenders how good you are with money, how good you’ve been with debt and how likely it is that you can make the repayments on time.
With a good credit score, you’re not really a risk to lenders. You’ve borrowed money, paid it back on time and have a history of stability and responsibility. Because of this, lenders are likely to offer you better rates or larger amounts of money.
A bad credit score means the opposite. You have a blotchy history with some missed payments, large debts and possible even some defaults. You’ll find it harder to borrow money from mainstream lenders and will probably have to pay higher interest rates.
But if you have no credit history, you’re neither a good or bad prospect for lenders. You’re an unknown entity. And that, in itself, is a risk for lenders.
With no credit history, lenders have no idea whether you’ll be good with money or bad with money. They don’t know whether you’ll repay on time or default. And they don’t know whether it’s a responsible move to lend you money.
This makes it likely that they’ll say no to your loan application.
However, there are two things you can do. You can either build your credit history or apply for a guarantor loan.
Building your credit history
Without a credit history, lots of things in life are going to be more difficult for you. Things like mobile phone contracts, mortgages and credit cards are almost always based on your credit history to some extent.
As such, if you want to tackle your problem at its root, it’s a good idea to start building a credit history now and apply for a loan later. (That way, you’ll never have to ask can I get a loan with no credit history? again.)
Here are some quick pointers so you can get started:
- Make sure you’re on the electoral roll: this is a weird one, but lenders search the electoral register when you apply for a loan to double check the details you’ve provided. Not being on the electoral register is another red flag that works against your application.
- Get an overdraft: if your bank offers an overdraft on your account, take it. It counts as a line of credit and will help build your credit score. Just remember to use it responsibly and not fall into the “living out of your overdraft” trap.
- If you can, get a credit card: even a credit card with a low credit limit establishes a credit history and helps you get your foot on the ladder. Experian’s page of credit builder credit cards is a great place to start.
- Get utility bills in your name: Even without a credit history, having an electric or gas bill in your name can help. It won’t establish a credit history, but it will demonstrate the responsibility of paying bills on time.
Or, you can apply for a guarantor loan
When people ask can I get a loan with no credit history?, this is our most common answer.
And that’s not just because we’re guarantor loan experts, it’s because guarantor loans are perfect for people with no credit history.
Having a guarantor (we accept anybody over the age of 21, who has a regular income and can afford to make the loan repayments on your behalf as guarantors) means that the lender has double the chance of getting paid back, completely minimising the risk of lending to you.
This clever trick makes it much more likely that you’ll be accepted to borrow money. But not only that, it also means that you could get access to much better rates than you would on non-guarantor loans.
And that’s a double win because regular repayments on a guarantor loan can help you build a good credit score for the next time you need credit.
So, there you have it, the definitive answer to can I get a loan with no credit history? If you have any more questions about your finances, credit history or applying to borrow money, let us know and we’ll tackle them right here on the blog!
- Author The Bamboo Team
- Posted 28 August 2019