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How To Get A First Time Personal Loan Without A Credit History

7 minute read UPDATED: February 06, 2023


If you are in need of a personal loan, but have no credit history, you may have more options available than you think. However, you may have to put some work into finding the right lender and type of loan you can get.

To help you, we’ve put together this guide on how to get a first-time personal loan with no credit history. We’ll walk you through the process and help you understand your options.

Can I Get A Personal Loan With No Credit?

Yes, it’s possible to obtain a personal loan without a credit history. That said, you may be faced with higher interest rates and unfavorable loan terms, especially when applying for an unsecured loan.

With an unsecured loan, borrowers aren't required to provide any type of collateral such as a house, car or savings account to secure the loan. Without this collateral to protect them, lenders instead use an individual’s credit history and financial status to assess their risk in lending you money. In turn, they will protect their risk by charging borrowers more in interest and offer stricter loan terms because they don’t have strong creditworthiness.

However, having no credit history doesn’t prevent you from obtaining the financing that you need. The most important thing is to research your options and work with a potential lender to provide them with alternative, promising metrics that can help them gauge their risk in lending to you.

Reasons Why You Don’t Have A Credit Score

There are many reasons why your credit score could be nonexistent. What’s important to understand first, though, is that having no credit score is very different from having a bad credit score. A low credit score tells lenders that you have been unsuccessful in managing your finances or other loans before, which makes you a higher risk. When you have no credit history, this means that there is no existing record of your financial history.

You may have no existing credit history for any of the following reasons:

  • You’ve never had a credit account. If you’ve never opened a credit card or taken out any type of loan, then there will not be anything for the major credit bureaus to report on. This is most common for individuals just entering into their adulthood who haven’t had much time to establish credit.
  • You haven't used credit within the past two years. Similarly, if you haven’t utilized any credit in the last 2 years, there won’t be anything for the bureaus to generate a score from. It’s important to keep your accounts active by using your credit cards every so often and continuing to make on-time payments.
  • You’re a recent immigrant. If you’ve recently immigrated to the U.S., you’ll unfortunately need to rebuild your credit from scratch even if you had a stellar credit score back home.

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Why You Should Consider Waiting To Apply For A Personal Loan

If you’re in a position where you can wait to apply for financing and instead focus on building your credit over time, you should consider doing so. Those with a good credit score and a long-standing financial history can qualify for personal loans with lower interest rates and more favorable loan terms.

The credit score required for a personal loan will vary from lender to lender, but in general you’ll need to have a 650 or higher. Without this, it could be difficult to qualify for a personal loan. Some lenders may be willing to be more flexible with this requirement based on other factors, but it’s not guaranteed.

Applying for a loan with a credit score will certainly increase your chances of approval, but the reality is that not all first-time borrowers will be able to wait. In that case, you may need to use another method to qualify.

How To Get A First Time Loan With No Credit

Although qualifying for a personal loan without a credit history won’t be easy, it is possible. If you’re in an emergency, you may consider using one of the following methods to increase your chances of approval.

Work With Your Bank Or Credit Union

If you have an established bank or credit union that you work with, consider asking to meet with an advisor to see if they have any options available for you. Banks and credit unions can use information from your account like your spending habits and deposit frequencies to assess your ability to qualify.

Find A Co-Signer

If you want to increase your odds of approval for a personal loan, consider using a co-signer. Having a second individual with strong credit on the loan can also help you get lower interest rates and better terms. You should only get a co-signer if you are confident in your ability to make your payments each month, otherwise you could cause damage to their credit score. Rocket LoansSM does not currently offer the option to co-sign on loans.

Ask To Borrow From Family Or Friends

If you are in an emergency situation and worried that you won’t qualify for traditional financing, consider asking your family and friends. If they are willing to help you, you can set up an agreement with them to treat this exchange like any other loan with an agreement that outlines your joint terms and conditions.

Credit Builder Loans

Some lenders offer credit builder loans. These small loans are specifically designed to help individuals who do not have any prior credit history. They can be beneficial in helping you prove your credit worthiness over time. The way they work is by applying your monthly payments to the principal and interest of the loan then reporting these payments to the credit bureaus. You will only have access to your money once the loan is paid in full, however, so it may not be the best option if you are in an emergency situation.

Loan Options You Should Avoid

While there are many options available for getting a first-time loan, there are also some loan options that you should consider avoiding.

  • Payday loans: Because payday loans do not require a credit check, many borrowers without an established credit history are enticed by them. However, it’s important to know that these loans come with interest rates often 400% or higher and have an extremely short repayment term, typically around 2 weeks.
  • Pawn shop loans: When you use a pawn shop loan, you’re putting something of high value down as collateral on a small loan. These items could include jewelry, autographed sports memorabilia or similar small valuables. Depending on the value of the item, you may be able to take out a small loan against this item, but you’ll typically be faced with a fairly high interest rate. If you fail to make your monthly payments, you could risk losing your valuable item.

Although these loans may sound promising during times of need, knowing what hidden fees or unfavorable terms come with them is important. You don’t want to risk using something that has the potential of damaging your credit score rather than building it up.

How To Establish Credit If You Have No Credit History

If you’re able to wait on applying for financing or even if you find a loan that you can qualify for, it’s still critical that you continue working on building your credit. You’re likely to face a credit check in the future when being approved for other loans or when making major purchases, such as a car or house. When this time comes around, you’ll want to have a well-established credit history that proves your worth as a trustworthy borrower.

There are many strategies you can use to build your credit history from becoming an authorized user to applying for a credit card.

Become An Authorized User

When you become an authorized user on someone else’s credit card account, you can use it for purchases and pay it off each month as you would your own card. With this strategy, you’ll want to make sure that the cardholder has a strong financial track record with their account and does not carry a high balance. It’s also important that you stay on top of your payments as the credit card holder is ultimately responsible for all charges on the account.

Apply For A Credit Card

You may be able to qualify for your own credit card through a secured or student account.

  • Secured credit card: With a secured credit card, you will need to put a refundable security deposit down when applying. You charge purchases on this card up to the amount that you put down as the security deposit.
  • Student credit card: Student credit cards are designed to help students who are new to the world of credit begin laying the foundation for a successful financial future. By establishing credit early on, you can help your future self qualify for better rates and terms for a mortgage, a car loan or loans for other larger purchases.

Continue To Monitor Your Score

Over time, even after you’ve built strong credit, you’ll want to continue monitoring your credit score closely. You can request your free credit report through the major credit bureaus or with a credit monitoring service. With this report you’ll be able to see if your efforts to build credit are working, along with any errors and areas of your credit score you can focus on improving. After you begin building credit, it will take around 6 months for your score to be generated.

Final Thoughts

Getting a personal loan for the first time without a credit history is certainly more difficult, but it’s not impossible. Whether you’re able to find a lender that’s willing to work with you or if you take the time to wait and focus on building your credit, it’s important to continue practicing good financial habits. Monitoring your credit report and making on-time payments towards your loan will help you get the score you need to qualify for favorable loan options in the future.

Once you’ve built up a strong credit history, apply for a personal loan through Rocket LoansSM to find the one that fits your needs.