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To get a loan with no credit, try using your history of on-time payments as part of your application.
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If you want to get a loan with no credit, begin by looking for lenders that accept non-traditional credit histories like rent or utility payments.
Other loan options for borrowers with limited credit histories include Payday Alternative Loans (PALs), secured loans, and 401(k) loans.
To build credit from scratch, try applying for a secured credit card or credit-builder loan, or ask to be added as an authorized user on someone else’s credit card.
There are many reasons why you might not have a credit score. On the one hand, you may be young or recently moved to the United States from abroad and haven’t had the opportunity to build a credit profile yet.
On the other hand, you may be someone who prefers to pay for things with cash or a debit card and you’ve simply never applied for a credit card. Having no credit history doesn’t mean that you’re financially irresponsible. In fact, many people with no credit are incredibly creditworthy individuals.
While having no credit is much better than having bad credit, the reality is most lenders do use credit scores in their lending decisions. And having no credit can make it more difficult to get approved for a mortgage, auto loan, personal loan, credit card, or any other type of credit.
But you may be surprised to learn that it is possible to get a loan with no credit.
How to get a loan with no credit
If you’re looking to get a loan without a credit history, here are five strategies worth considering.
1. Look for lenders that consider non-traditional credit histories
Even without a credit score, there may be other ways to prove to a bank that you’re a trustworthy borrower. Some lenders will accept alternative data to assess a borrower’s risk, like their bank account activity and payment history toward rent, utilities, and other bills.
To get approved for a loan using your non-traditional credit history, you may need to contact a lender directly. It’s even better if you can find a bank or credit union that has a local branch near you so that you can talk to someone face-to-face.
If you plan to apply for a loan with a lender that offers manual underwriting, here are a few documents that you’ll probably want to collect beforehand:
Recent W-2sRecent tax returnsLast four to six pay stubsLast three to six monthly bank statementsRent payment history from the last 12 to 24 monthsUtility payment history from the last 12 to 24 months
What kind of loans can I get with no credit?
Manual underwriting is most common in the mortgage industry. The government-backed FHA, VA, and USDA loan programs will each consider borrowers with no credit. But to gain approval, all your alternative credit information may need to be verified by a third-party non-traditional credit report.
If you’re looking to take out a personal loan with a thin credit file, payday loans aren’t your only option. Several online lenders have been known to lend money to borrowers with limited credit histories, including Avant, Prosper, Upstart, and Lending Club.
Some lenders may even offer “no credit check” personal loans. But you’ll want to check the fine print with these loans before signing on the dotted line. “No credit check” loans could be more likely to charge high interest rates and fees or have unattractive terms.
2. Apply for a payday alternative loan (PAL) from your credit union
If you need emergency cash and you happen to be a credit union member, you should check to see if it offers Payday Alternative Loans (PALs). PALs are small, short-term loans meant to offer an alternative to high-cost payday loans.
These unsecured loans come with terms of one to six months and borrowed amounts can range from $200 to $1,000. Unlike payday loans, PAL application fees cannot exceed $20 and the maximum interest rate is 28%.
However, you won’t qualify for a PAL until you’ve been a member of your credit union for at least one month. So unless you’re already a credit union member, a PAL won’t be a good option if you need immediate cash.
3. Obtain a secured loan by putting down collateral
Since unsecured loans don’t require any collateral, lenders tend to require that borrowers have strong credit scores in order to mitigate their risk. However, if you’re able to put down something of value as collateral, it could help you secure a loan even with no credit.
Here are a few examples of assets that a lender may accept as collateral for a secured loan:
Real estate (home or undeveloped property)VehiclesBank accountsStocks, bonds, or mutual fundsInsurance policiesCollectiblesGold, silver, or other precious metals
In addition to more lenient credit requirements, secured loans may also offer better interest rates or terms. But the downside is that your collateral will be at risk if you miss a payment or default.
Make sure you weigh the pros and cons of a secured loan before you take one out. And try to steer clear of predatory title loan or pawn shop loan lenders that can place you on a financial treadmill by charging exorbitant rates.
4. Borrow from your 401(k)
If you have no credit and need quick access to a large chunk of cash, a 401(k) loan could be a legitimate option. But there are several pros and cons that you need to consider before you borrow from your retirement.
The biggest advantage of 401(k) loans is that you won’t be dealing with a lender whatsoever so there is no credit score requirement. With a 401(k) loan, you’re actually borrowing from yourself, so the “interest” you pay just goes right into your 401(k) account. Plus, as long as you stay with your employer, you’ll have up to five years to pay back the loan in full.
If you plan to repay the money quickly, a 401(k) loan could be a far more favorable borrowing choice than a payday loan, title loan, or pawn shop loan. However, know that if you don’t replace the withdrawn amount by the due date, you’ll have to pay taxes on the funds plus a 10% penalty.
Also, if you lose your job or leave your employer, the entire loan comes due and will need to be paid in full by the due date of that year’s tax return. So if your job situation is unstable, borrowing from your 401(k) becomes a riskier move.
5. Add a creditworthy cosigner to your loan application
Adding a creditworthy family member or friend as a cosigner could help you obtain a loan when you have no credit. However, keep in mind that your cosigner’s own credit will also be damaged if payments are missed or the loan becomes delinquent.
Entering into a cosigning relationship can be dangerous from both a financial and relationship perspective. If you do decide to ask someone to cosign for you, you’ll want to take extra care to make sure that your payments are always made in full and on time.
How to build credit from scratch
If you don’t need to take a loan immediately, a better option may be to wait until you’ve had time to build a credit history. One option for building credit from scratch is to apply for a secured credit card.
Since borrowers have to put up a cash deposit to obtain a secured card, lenders are more willing to offer them to consumers who have limited credit or none at all. And as long as you choose a card issuer that reports to the credit bureaus, your positive payment history can help you quickly begin to build a positive score.
Taking out a credit-builder loan with a bank or credit union is another credit-building option.
Finally, you can ask to be added as an authorized user on someone else’s credit card account. Just make sure that the card issuer reports authorized user activity to the credit bureaus.
With each of these options, you may be able to build a solid credit score in six to 12 months, or maybe even faster. And considering the additional borrowing opportunities that could become available to you with strong credit, pushing off your loan application until then might be best if you can afford to wait.