How to get a loan with no credit

Getting almost any loan without a credit history can be a challenge, according to the Consumer Financial Protection Bureau (CFPB). But there may be options. 

Learn more about how to get a personal loan if you haven’t established a credit history. Plus, learn about alternative ways to borrow money when a personal loan isn’t an option.

What you’ll learn:

• Having little to no credit history can make borrowing more difficult. But it doesn’t automatically mean a personal loan is out of reach.

• In general, personal loans are relatively small, unsecured loans that borrowers can spend as they see fit.

• Building credit takes time, but starting now could improve your chances of qualifying in the future.

• Secured credit cards and credit-builder loans can help build credit history when used responsibly.

Having no credit means the three major credit bureaus (Experian®, Equifax® and TransUnion®) don’t have enough information to generate credit reports. Without a credit report, credit scoring companies (FICO, VantageScore) can’t calculate credit scores. 

The CFPB refers to this situation as being credit invisible or unscorable. Sometimes it might be called an insufficient or thin credit file. Someone can be credit invisible or unscorable for a number of reasons, like when they have:

• No history of applying for loans or credit cards: Examples could include a younger person on their own for the first time or someone who just moved from another country.

• Credit accounts with no recent activity: The CFPB calls this a stale file. If no activity has been reported within six months of a credit score being calculated, that could affect scoring. 

• Credit accounts that are closed: This is another example of a stale file. For example, getting married, on its own, doesn’t affect a person’s credit. But if someone who used to have their own accounts closes them after getting married, that could have an impact.

• Credit accounts opened too recently: There are a lot of factors that play into timing, but the CFPB explains that it can take at least six months for a new credit account to be scorable.

• Credit history that isn’t being reported: There are multiple credit bureaus that compile credit reports. And there are multiple credit scores and scoring models. If credit activity isn’t reported, though, a person may be unscorable.

Having no credit can limit access to traditional loans. But it doesn’t mean there aren’t other options.

There’s a difference between having no credit and having bad credit. 

• No credit: There isn’t enough information in a credit report to calculate scores. This could be the case for young adults, first-time loan applicants or people new to the U.S.

• Bad credit: Lower credit scores can happen for a variety of reasons. Missing payments, maxing out credit cards and defaulting on debts are a few actions that can negatively affect credit scores.

Lending decisions are up to individual lenders. So there may be lenders that will approve people for a personal loan even if they have no credit history. There just may be fewer options. And the loans they’re eligible for may charge higher interest rates and fees.

Building credit takes time and consistency. To see where you stand, you can get free copies of your credit reports at AnnualCreditReport.com. 

You can also monitor your credit with CreditWise from Capital One. It’s free for everyone, and using it won’t hurt your credit scores. And the CreditWise Simulator shows how certain financial actions, like taking out a loan, might affect your credit.

Personal loans are offered by banks, credit unions, peer-to-peer (P2P) lending sites and other lenders. Many advertise these loans as relatively small, unsecured loans that allow borrowers to spend as they see fit. That means funds aren’t backed by collateral like loans for a house or a car typically are. 

But there may be secured options. And some loans, such as title or payday loans, may have additional risks or be more expensive.

Before you apply for a personal loan, it’s helpful to understand the principal, interest, fees and payment terms. 

The required credit score for a personal loan varies. Each lender can set its own requirements, meaning some may offer loans to people with no credit.

If you’re trying to build credit and access money, there are more options than just personal loans.

• Credit cards: There are multiple types of credit cards designed for people with limited credit histories. For example, the Capital One Platinum Mastercard® could help build credit if it’s used responsibly by doing things like paying statements on time every month. You could also consider a secured credit card. These require a refundable security deposit, which can make them easier to be approved for than traditional cards. Student credit cards are designed for people in school who might be looking for their first credit card.

• Authorized user: If the timing isn’t right to get your own credit card or apply for a loan, you might consider becoming an authorized user on the account of a trusted family member or friend. Authorized users can often make purchases with their card, while the primary cardholder is ultimately responsible for all the charges made on the account.

• Credit-builder loans: They’re not great if you’re trying to access cash. But as the name indicates, they’re useful to build credit. Compared to traditional loans, these loans sort of work in reverse: A borrower makes payments to a lender and then gets access to the money at the end of the loan’s term.

Here are the answers to frequently asked questions about getting a loan with no credit history.

Getting a loan without an established credit history can be challenging, but it’s not impossible. If you’re unable to qualify for a personal loan, there are alternatives. 

Credit cards are another way to get convenient, flexible access to funds. If you’re new to credit or searching for your next credit card, Capital One can help. 

• See whether you’re pre-approved for credit cards without harming your credit scores. 

• If you’re looking to build your credit with responsible use, explore cards for people with fair credit. 

• Earn unlimited 1.5% cash back on every purchase, every day, with a cash back rewards card. 

• Monitor your credit report and score with CreditWise. It’s free, and using it won’t hurt your credit scores.