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If you have a poor credit score or no credit history at all, you might think getting a personal loan is out of the question. The good news is there are options for you to get a loan that doesn't require a credit check. Getting a personal loan without a credit check may not be easy, but here are a few ways to get it done.
The first step is figuring out if applying for a loan that doesn't require a credit check is your only option. These types of loans often have certain pitfalls, like higher interest rates and stricter terms, and are not typically recommended for someone who could qualify for a more conventional loan.
Checking your own credit does not hurt your score and will give you a better idea of what type of loans you may get approved for.
Know Your Credit Score
Most people with little or no credit history have what's considered a "thin credit file," meaning their credit history contains only a few if any, credit accounts. People with thin files often have a hard time obtaining new credit, as their lack of credit history makes it difficult for lenders to assess their risk.
Whether you have a thin credit file or just bad credit, you need to understand exactly what‘s in your credit report before applying for a loan so you know where you stand when talking to lenders. You might check your credit and find that you actually have a score that allows you to apply for a regular personal loan with better interest rates and terms—which will save you money over time.
Most lenders use your FICO® Score—which ranges from 300 to 850—when considering you for a new loan. Within that range, scores below 669 are considered "fair" and "poor," while scores above 700 are considered "good" and "excellent" depending on where they fall. If your FICO® Score doesn't fall into the good to excellent range, it might be a good idea to find a lender that will not require a credit check for your loan.
You can get a free copy of your credit report from Experian to find out more about your credit history and scores.
Approach a Bank or Lender Directly
Approaching a bank or lender directly might be a good option if you have little to no credit, or poor credit scores, and want to use other financial indicators—like employment or income—to prove your creditworthiness.
More and more lenders are using alternative data—personal information not included in your credit report—to establish whether you pose a risk as a new borrower. By doing this, they get a more holistic understanding of your financial profile and may be more likely to consider your application.
Working with a lender that considers alternative data will not only improve your chances of getting approved for a personal loan, but it may also get you better terms. Some things these lenders consider in addition to your credit reports and scores include income, employment, a bank account in good standing, debt-to-income ratio and a history of other on-time payments.
To find out if a lender uses alternative data, look through personal loan advertisements for specifics about how the lender uses credit in their decisions. You can also browse through Experian's personal loan marketplace, where several lenders use alternative data.
Be prepared to prove your creditworthiness to a lender when asking for a loan without a credit check. Having the documents and records you need to prove that you are financially stable and able to pay back new debt will help boost your chances of getting approved.
Here are some documents you should have when talking to lenders:
- Tax returns for the past two years
- Employment history and pay stubs or other proof of a paycheck
- Borrowing history, including a home mortgage, auto loan, student loan or other loan and evidence that you've made progress paying them off
- Documentation on credit card debt
- Bank statements
- Education records
Where Can You Get a Personal Loan with No Credit Check?
Online lenders such as Prosper, Upstart and Lending Club—all Experian loan partners—have options for people with scant credit history. While you may still need at least one or two accounts in your credit report, these lenders look at features of your financial profile beyond just your credit reports and scores when considering you for a loan.
APR: 6.00% to 29.99% depending on your financial profile
Term: 36 or 60 months
Upstart offers loans of up to $50,000 that can be used to pay off credit cards and consolidate other types of debt. Upstart has an easy application process and considers applicant information beyond credit reports and scores, such as education, the area of study and job history.
APR: 6.95% to 35.89% depending on your creditworthiness
Term: 36 or 60 months
Lending Club offers loans of up to $40,000 and has a quick application process that allows you to check your interest rate without affecting your credit score. Lending Club offers personal loans and debt consolidation loans, and funds are often deposited in as few as three days. Lending Club requires credit checks for final approval, but still has borrowing options for people with less than perfect credit.
If you are a member of a credit union, you may be able to get a loan from them without a credit check. Credit unions are known for offering loans with good terms and may be willing to consider information other than just your credit score when gauging your creditworthiness.
Credit union membership is sometimes based on your employer, where you live, or whether you are affiliated with certain organizations. Contact your local credit union or your employer to see if you are eligible for membership.
Payday Loan Companies
Payday loans are another option for getting a loan with no credit check. However, their often astronomically high annual percentage rates (APRs) often make them a last resort. For reference, a bank-issued personal loan obtained by a borrower with good credit might have an APR of around 10%. By comparison, the average payday loan has an APR of 400%. Payday loans also come with high fees and short repayment periods.
Similar to a payday loan, title loans are another borrowing option you might qualify for without a credit check. Title loans require you give the title of your car over to the lender as collateral for your loan. Your loan amount will be equal to the value of your car, and you must own your vehicle outright. If you default on your repayment, the lender may be able to take ownership of your car.
While both payday and title loans may be good options for getting quick money with no credit check, the expensive combination of fees and high interest make them a choice you should consider only when in dire financial need.
Check the Fine Print When Getting a Personal Loan
Once you've chosen a loan, carefully read the agreement's fine print. Identify any fees and charges, and make sure you understand the penalties of paying late. It's critical for the health of your credit scores to make all your payments on time. Payment history is the most important aspect of your FICO® Score, and missing even one payment can bring down your score.
How to Establish Credit When You Have No Credit History
Establishing and building your credit history is critical if you plan to obtain any type of loans, such as a mortgage or auto loan, in the future.
Finding a lender that will give you a loan without a credit check is a great option for getting your credit history off the ground. Make sure that the lender reports your account and payment history to one or all of the three major credit bureaus, and then pay all your bills on time.
Here are a couple other ways you can start building your credit history:
Apply for a Secured Credit Card
If you're looking for a way to kickstart your credit history, consider applying for a secured credit card. Credit cards are one of the best ways to establish and build your credit, and a secured card is specifically geared toward people with little or no credit. With a secured card, you open an account with a cash deposit, and that deposit amount is your credit limit. This creates less risk for the issuer but allows you to use a credit card when necessary—and build your credit at the same time.
Get a Cosigner
Finding someone with established credit to cosign for a loan with you is another way of getting a loan with little to no credit history. Cosigners apply for the loan with you and agree to assume the debt if you default. That means if you miss a payment, your cosigner will be responsible for paying that amount. Cosigners help lenders feel more comfortable with taking on a risky borrower and are a common way people with little credit history can start building credit.
You can also ask someone with a credit card to add you as an authorized user. In this case, you will be issued a card under that person's account and a record of the card may show up in your credit report. Depending on the card issuer, authorized user accounts may not be reported to one or more of the three major credit bureaus. Check with the card issuer ahead of time to find out what information they report to the credit bureaus.
Want to instantly increase your credit score? Experian Boost™ helps by giving you credit for the utility and mobile phone bills you're already paying. Until now, those payments did not positively impact your score.
This service is completely free and can boost your credit score fast by using your own positive payment history. It can also help those with poor or limited credit situations. Other services such as credit repair may cost you up to thousands and only help remove inaccuracies from your credit report.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on April 11, 2018, and has been updated.