How to get a loan with no credit

A loan can save the day when you have a need for cash. But trying to get one can make you feel like you’re in a house of mirrors—you need good credit to get a loan, but you need loans and other accounts to build good credit. 

You have options, and we’ll show you a few.

Understanding credit and no credit

If you have no credit or you’ve been told you have a “thin file,” that means you don't have enough credit history to generate a credit score.

Credit scores reflect your experience with credit accounts and are a tool lenders use to predict how likely you are to repay your debts. Scores range from 300 to 850 and are based on what’s in your credit report at the moment that your score is calculated. Credit scores can and do change. 

The information in your credit report that can affect your score includes:

• The kinds of credit accounts you have 

• How much you owe on your credit cards vs. your credit limits

• The age of your accounts

• Your payment history

• Recent applications for new credit

If you've never had a credit card or a loan in your name (or if you did but it was a very long time ago), then there'd be nothing to report. To get a credit score, you need to have at least one account on your credit report in the past six months, and one account on your credit report that has been open for six months or longer. The same account can satisfy both requirements. (Also, there can be no mention of “deceased” on your credit report. If you are mistakenly reported as deceased by one creditor, contact them. If your entire file is reported as deceased, make an appointment to get help from your nearest Social Security Administration office.)

Loans for people with no credit

If you need a loan with no credit, do your best to take it slow and compare your options. Advertised no-credit loans can be quite expensive. 

Here are three options you might consider:

• Secured loans. A secured loan lets you borrow against collateral (something of value that the lender could keep if you don't pay the loan back). Banks that offer secured personal loans may let you borrow against an investment account, a vehicle, jewelry, or something else of value.

• Payday alternative loans. A payday alternative loan (PAL) is a short-term loan that some credit unions offer as an alternative to payday loans. Typical payday loans are so expensive, they frequently lead to a cycle of debt. A payday alternative loan can put a few hundred dollars in your bank account at much lower rates. And paying a PAL back on time could help you build credit. 

• Co-signed loans. A co-signed loan is one that someone else offers to guarantee. Your cosigner agrees to let the lender use their credit history for loan approval. If you don’t repay the loan, your cosigner will be responsible for it. 

• Cash advance app. Some banking apps allow you to take small loans against your next paycheck for free or for a very low fee. Typically, the app needs to be linked to your checking account and you would need to have a job that pays you by direct deposit. 

Preparing to apply for a loan

Here's what to consider when comparing no-credit loans:

• Interest rates and APR

• Lender fees

• Repayment term

• Minimum and maximum loan amounts

• Credit requirements, if any

• Income requirements, if any

There's one more thing to check. Find out if the lender reports to the credit bureaus. If you make your payments on time and the lender reports them, that could have a positive effect on your credit standing.

How to increase your chances for loan approval 

Getting a loan with no credit can be challenging, but there are some things you could do to improve your chances of being approved. 

Here are a few tips for making yourself a more creditworthy borrower to lenders. 

• Get started with credit. Having even one account on your credit report can show lenders that you have some experience with managing debt. To build credit in your name, you could apply for a secured credit card, which usually requires a cash deposit to open. Alternatively, you could ask someone in your life to add you to one of their credit cards as an authorized user. Doing this would add that account's credit history to your credit reports. 

• Find a co-signer. Having a co-signer could lower the risk to the lender and make them willing to approve the loan. If you're thinking of asking someone to co-sign, choose a person with a good or excellent credit score. And keep in mind that if you don't pay the debt back, you could hurt your own credit score—and theirs. 

• Explore community resources and programs. Nonprofit credit counselors and local credit unions are two great options for finding free or low-cost credit-building programs. You can get help with budgeting and money management, and depending on the program, you might get access to loans for people who are just getting started with credit. 

Applying for the loan

Applying for a loan with no credit is a process and it helps to know what you can expect. Here's a checklist of things to know and do when you're trying to get a no-credit loan. 

• Organize your documents. As mentioned, you might need certain documentation to apply for a loan with no credit. A photo ID, recent pay stubs, and recent bank account statements are common requests.  

• Select a lender. If you haven't chosen a lender yet, you'll need to do that next. The best lender for no-credit loans is ultimately the one that offers the loan amount you need at reasonable rates, with eligibility requirements you can meet. Get pre-approved by lenders that do a soft credit check so you can compare offers.  

• Complete the application. Once you've picked a lender, you can apply, usually online or in person. You'll need to provide personal information such as your name, address, date of birth, and Social Security number. You'll also need to tell the lender how much you want to borrow and what the money is for. 

• Wait for approval. After you turn in the application the lender will review it to let you know if you're approved. That can take just a few minutes or several days. If you're approved, you should have a chance to review the loan terms before signing off. If you're comfortable with the terms, you can sign the paperwork and arrange for the lender to send the funds to you.

• Collect the loan funds. Your lender might give you the option to have the loan funds deposited into your bank account. You'll need to share your bank account number and bank routing number to arrange the deposit. If you're applying for a loan with a local lender, you might also have the option to get a paper check or have the loan funds loaded to a prepaid debit card. 

How to manage your new loan

If you've been approved for a loan with no credit, it's up to you to make the most of it. That means not only spending the money wisely but repaying it wisely too. 

Here are a few ways to ensure that you're using a loan responsibly. 

• Pay on time. Making on-time payments is the best way to build good credit. Setting up automatic payments to your loan from your bank account can help you avoid paying late. If you can't do that, you could set up a bill pay reminder to alert you a few days before the payment is due. 

• Avoid additional debt. Don’t take on other debts if you don't need to. It might be tempting to apply for a credit card, for example, but that could leave you with more debt to repay. 

• Plan ahead. If you're getting a loan it's probably because you needed money for something and didn't have it. And that's fine but here's the thing: loans cost you money in interest and sometimes fees. To the extent you are able, plan ahead for expenses by setting up an emergency fund or a short-term savings fund. Once you have money set aside, you reduce the need to borrow later on.  

Achieve is not a Credit Repair Organization and does not provide, or offer, services or advice to repair, modify, or improve your credit.

What's next

• Shop around to compare rates and terms for no-credit loans. 

• Consider applying for a secured credit card to start building a credit history. 

• Schedule a chat with a credit counselor to learn more about how to establish and build credit.