It’s no secret that nowadays, your credit score carries a lot of weight. Most of us can’t afford major purchases like a car out of pocket, but cars are often necessary to find well-paying work if you live outside a major city. If unexpected emergencies arise, we may not have the saving to pay for them.
Getting a loan can help you bridge that gap between your needs and your income until you can better balance the two. However, if you have no credit history, it can feel like a major headache to qualify for a loan.
That doesn’t mean you’re out of luck, though. There are still some ways to qualify for a loan even if you have no credit score.
Build Your Credit
One of the best ways to find a loan with a more manageable interest rate is to have good credit. Going from having no credit to having good credit is actually a lot easier than trying to boost a bad credit score.
If you have the time to start this process before you’re in a financial bind, there are a few common techniques that help you become someone with a credit history.
Become an Authorized User
One of the quickest ways to do this is to become an authorized user on someone else’s credit card. If you have a family member or close friend with good credit, they can add you to an already-established card account.
You will receive a copy of their credit card, but even if you put it in a drawer and never use it, it gives you credit history, particularly if they actively use the card and keep up with regular payments.
Get a Secured Credit Card
If you have a little cash set aside, you can get a secured credit card. Before applying, make sure the issuer reports to the credit bureaus to start building your score.
Basically, a secured credit card requires you to put down a deposit, usually equal to the card’s spending limit. So, if you put down a $500 deposit, you will have a $500 spending limit each month. For the best credit-building boost, make sure you use the card a little bit each month and pay it off in full.
This helps set the precedent that you’re a responsible spender and make you more appealing to other credit card and loan services.
Getting a Loan With No Credit History
Sometimes things happen and you need money right away, so you won’t have time to build your credit before applying.
Without a credit score, it’s like being a stranger to loan companies. They don’t know anything about you, so they are less likely to trust you. This means they will try to minimize their risk, often by only lending you a limited amount of money, having a high APR on the account, or requiring collateral or a co-signer to ensure your loan.
One of the ways banks may check that you’re a trustworthy borrower is to look at your personal history. A background check can show criminal history as well as employment history, so having a positive record can help you find better rates. Before applying, it may be worth checking to see what your records show. We recommend using a background check tool like this one here.
Credit Union Loans
If you bank with a credit union, they often have perks for their members, including a variety of loan types, some of which don’t require credit checks. They may instead look at your membership history with them, for example, they can see if you have regular income and that you don’t have a history of overdrawing your account.
These tend to be the best option in terms of interest rates, so if you already have banking history, try your local bank or credit union first.
Credit Check-Free Installment Loans
Private companies also offer loans in varying amounts that don’t require a credit check. Since these loans are considered a higher risk, however, the interest rates tend to be extremely high, sometimes requiring you to repay far more than you borrowed.
With interest rates topping 200% at some of these companies, save them for a last resort in only the direst of emergencies and try to pay off the loan as quickly as possible.
Payday Loans
Payday loan schemes are nothing new, but now can be done online, rather than in-person. If you have a steady job with consistent paychecks, you can get some of the value of your paycheck paid out early, but of course, you will have to pay interest or a flat fee depending on your provider.
Get a Loan Without Credit
Even if you don’t have any credit, you aren’t entirely without options if you need a loan. If you anticipate that you might need one within the next few months, you can take steps to start building your credit now.
Emergencies happen, so it’s good to know that there are services to provide loans without credit checks, though they can vary a lot in the interest rates you’ll be paying.
