Personal Loans With No Credit History

Looking to finance a major purchase? If it does not fit into a major category like an auto loan or home loan, what you need is a personal loan. But what exactly is a personal loan, and can you get one with no credit? Take a look.

What Is A Personal Loan?

A personal loan is a loan offered by local and online lenders. In most cases, it is not tied to any capital, like a home or auto loan would be. Instead, a lender will strictly look at the creditworthiness of the individual taking out the loan.

Once you secure your personal loan, it can be used however you see fit. Some use these loans to consolidate debt, renovate a home, or simply make a large purchase.

Do You Have No Credit?

Now that we know what a personal loan is, just what does it mean to have no credit, and why is this a problem?

Your credit report contains a history of your historical use of credit. It contains a record of your past and present finances. Banks and lenders use this information to judge how you handle credit and whether you would be a good risk.

Someone might have no credit if they have never taken out a loan, never opened a credit card, or have accounts that are just not being reported to the credit bureaus. This can be a big problem, especially when looking for an unsecured personal loan. Since these loans generally do not use collateral, a lender will be looking just at income and credit. No credit makes you a big risk for a lender.

Can You Get A Loan With No Credit?

Yes, you certainly can get a loan with no credit, but there will be some catches. A local bank will not be the answer, but there are several online lenders that will be willing to help. Websites like loanmonkey.net/ can help you get an offer from one of these lenders but be prepared because you may pay dearly.

With no credit, your fees and interest will be much higher than what someone with good credit would qualify for. This may make the loan payment much higher than you are expecting and the total cost of your loan could be steep.

Before accepting an online personal loan, be sure to think things through. Make sure that the cost of the financing is worth it and that it would not be more beneficial to build your credit first.

How Do You Build Credit?

Building credit is rather easy, it just takes time. The thing that you must keep in mind with your credit rating is that it is just math. It is simply a formula made up of several parts. Know the parts and you can build your credit.

Part 1: On-Time Bill Pay

This is the biggest factor in your credit score, making up a full third of your rating. To master this part, simply pay your bills on time. Of course, this only works if you have credit accounts to pay.

Apply for a few credit cards and use them responsibly. Even with no credit, websites like creditcardinsider.com can help you find card issuers that may approve you. Get your cards and use them responsibly and you will see a credit score increase in time.

But what about the here and now? For an immediate boost, sign up for a free account with Experian. They have a program called Experian Boost that gives you credit for paying regular bills such as utilities and cell phones. All that you must do is sign up and link your checking account for an immediate credit rating boost.

Part 2: Credit Utilization

Simply speaking, this is how much of your credit you are using. Credit utilization makes up almost a full third of your rating.

The credit bureaus want you to have credit, they just do not want you to use it. Using too much of your credit could be a sign that you are in financial trouble. To master this part of your rating, keep your balances low. Once you secure a credit card, keep your balance under 30 percent of your total available credit.

Your best bet, especially with new credit, is to simply pay off your card or cards completely when you get your statement. Credit will be new to you, so do not get used to carrying a balance. It will only get you into trouble.

Other Parts

On-time bill pay and credit utilization make up nearly two-thirds of your credit rating, so concentrate on them.

The other major parts include the length of credit history, credit diversity, and new credit. When building your credit, these are things that you cannot do much about. Master the first two parts of your credit and the rest will come around in time.