When it comes to borrowing money from a lender, a lack of credit history can hinder your progress. Having no credit history doesn’t mean you’re bad with money; there are actually around 26 million US citizens who are credit invisible due to having no credit score. Unfortunately, being credit invisible can make it difficult to borrow money. Luckily there are ways to get the cash you need. Here are a few top tips to help you get approval for a personal loan.
What is a Personal Loan?
A personal loan describes the amount of money an individual borrows from financial institutions or licensed lenders. This amount of money is used for personal reasons, and it needs to be paid back in regular installments over a period of time, as agreed with the lender. Personal loans cover personal expenses such as medical bills, vacations, debt consolidation, or home improvements.
The Value of Your Credit History
Conventional personal loan lenders check your credit score to ensure you can be trusted to pay back your loan in time. A credit score is a value between 300 and 850, with the highest number indicating an excellent credit history. Your credit history gives lenders a good indication of what you would be like as a borrower. Good credit scores are built up from regularly paying back debt on time, therefore a bad score suggests to lenders you might be a high-risk borrower. Although there are plenty of reasons why someone has a low credit score, a common reason is missed payments in the past. No credit history is usually better than bad credit history, and it could be a result of a recent move to the states; you are young, and you still need to build it up, or you simply don’t pay for things with credit cards.
Solutions for People with No Credit History
Build Up Good Credit
If you have time to spare, waiting and building your credit history over time can help you achieve a good score. You can do this by applying for a secured credit card, using it to make purchases, and repaying the money in a timely manner. Applying for a credit builder loan or gaining authorization to use someone else’s credit card can also help you build history. With a good score naturally built up over a period of time, you can benefit from a wider range of loan terms and a reduced interest rate.
Find the Right Lender
Not all lenders need borrowers to have a credit history; some consider other factors before making the decision to grant you a personal loan. Look for a reputable personal loan company to help you get the finance you need.
You can obtain a secured personal loan by reassuring lenders that you have collateral to fall back on in case you can’t make your payments. Collateral includes homes, investments, cars, and bank accounts.
Apply with the Help of a Co-signer
Asking someone you know with excellent credit to get a loan with you can boost your chances of getting a loan approved. Cosigners are equally as responsible for paying back the loan.