Can You Pass a Credit Check With No Credit History?

Can You Pass a Credit Check With No Credit History?


11 Min Read

A study conducted by the US Government Accountability Office found that approximately 45 million of the country’s citizens have no credit history [1]. Such people are called “credit invisible”. This means they have no records of previous loans or credit cards in the databases of the three major credit bureaus – Equifax, Experian, and TransUnion. This will most likely lead to difficulties when trying to get a loan. If you’re curious about the implications of lacking a credit history when obtaining a loan, continue reading.

What Is a Credit Report?

A credit report is a borrower’s file that contains information about all the loans they took out and how timely they were repaid. If you fail to repay your loan obligations on time, derogatory marks appear on your credit report, which lowers your credit score.

Lenders request credit reports when they need to verify your creditworthiness and solvency, that is, your ability to repay borrowed money on time. The higher the credit rating, the higher the likelihood of loan approval on favorable conditions (low interest rates, flexible repayment terms).

Why Don’t You Have a Credit History?

A lack of credit history does not mean you have not paid your bills. It shows that your financial activity information has not been reported to one of the three major credit bureaus. A credit credit bureau is an organization that collects, analyzes, and stores information about citizens’ credit histories. This data is then interpreted using credit scoring models to create a credit score.

If you have never taken out loans or opened credit cards, you may not have a credit history. Similarly, if you have not opened utility accounts with payments reported to the credit bureaus, you will not have a credit rating.

On the one hand, this is not bad because it indicates that you did not have financial problems. On the other hand, if you need to take out a loan in the future, difficulties may arise since lenders consider your credit history an indicator of creditworthiness. Without it, lenders will perceive you as a risky borrower, which may make it difficult to get approved for a loan or get favorable terms. Learn more about why you may not be able to get a loan.

How Does Having No Credit History Affect Your Score?

No credit score means your credit history is empty. However, it is worth understanding that there is no zero credit rating, as FICO and VantageScore scores range from 300 to 850. Thus, the minimum score is 300. Your initial rating might align with the “fair” range more than the “poor” range, typically linked to unpaid debt and payment issues. However, the exact score depends on the scoring method (such as FICO or VantageScore) and other factors the credit reporting agencies consider. Find out what credit score you normally start with.

Credit Options with No Credit Score

Although getting a loan without a credit history is difficult, several options are still available to borrowers without credit scores.

Secured Credit Cards

A secured credit card is a type of borrowing you can get even with no credit score. They require collateral, which will determine the size of the credit limit. Using your credit card responsibly will demonstrate you as a reliable borrower, increasing your credit score. Choose a secured credit card with low-interest rates to make borrowing more comfortable. Also, check whether your credit card issuer reports payment information to the major credit bureaus.

Main characteristics:

  • Interest rates: from 15% to 25% per annum.
  • Repayment terms: you must pay at least the minimum amount each month. It’s usually a percentage of how much you owe or a fixed dollar amount. But in order not to pay interest, you need to repay the entire amount by a certain date.
  • Minimum and maximum loan amount: $200 to $5,000 or more.

Credit Builder Loans

This type of lending is designed specifically for people without a credit history. They work as follows: you apply for a credit-builder loan and make monthly payments upfront without receiving the loan funds. The issuer puts your payments into a savings account. If the loan agreement terms are met, you get the loan amount on hand and your credit rating increases. Small banks and credit unions typically offer credit-builder loans. Low interest rates characterize them.

Main characteristics:

  • Interest rates: from 6% to 18% per annum.
  • Repayment terms: from 6 to 24 months with mandatory fixed monthly payments.
  • Minimum and maximum loan amount: from $300 to $1,500.

Co-signer on a Loan or Credit Card

If your close friend or relative has a good credit history, you can ask them to become a co-signer on a loan or credit card. Their credit history will be considered instead of yours, making it easier to get a loan. At the same time, remember that responsibility between the parties is distributed equally, and if you fail to fulfill debt obligations, the credit ratings of both parties will suffer.

Main characteristics:

  • Interest rates: from 7% to 30% per annum.
  • Repayment terms: you must make regular monthly payments over a specified period.
  • Minimum and maximum loan amount: depends on the lender’s policies, the borrower’s creditworthiness, and the loan type.

Payday Loans

These are loans that are issued for a short period. They are available to people with no credit and bad credit. Payday loans have a simple obtaining procedure, but due to high interest rates, they can lead to a cycle of debt. Additionally, only a small percentage of online payday loan lenders report to the major credit bureaus, so if you want to improve your credit score, check with your lender about this feature. This type of lending should only be considered a last resort due to its predatory nature. Because of this, payday loans are even prohibited in some states.

Main characteristics:

  • Interest rates: exceed 400% per annum.
  • Repayment terms: the loan must be repaid within two to four weeks.
  • Minimum and maximum loan amount: from $100 to $1,000, with the maximum amount depending on government regulations and the borrower’s income.

Title Loans

A title loan can be obtained without a credit history, but you must provide the lender with your vehicle as collateral and prove your income stability. However, if you fail to repay the loan on time, the lender may repossess your vehicle. Like payday loans, title loans have high-interest rates and are considered risky borrowing options.

Main characteristics:

  • Interest rates: 25% to 300% per annum, with some lenders charging even higher rates.
  • Repayment period: up to 60 days.
  • Minimum and maximum loan amount: depends on the appraised value of the vehicle and the lender’s policies. Title loans typically range from a few hundred to several thousand dollars.

Personal Loans

Some direct lenders specialize in providing personal loans to people with no credit or bad credit. Because they may not conduct a traditional credit check, they have high-income requirements and charge higher interest rates to minimize risk. Consumer loans can be secured, that is, require collateral or unsecured. If you provide collateral or a guarantor for a consumer loan, you have a high chance of receiving favorable terms.

Main characteristics:

  • Interest rates: from 6% to 36% annual interest rate.
  • Repayment terms typically span one to seven years.
  • Minimum and maximum loan amount: from $1,000 to $100,000.

Peer-to-Peer Loans

Peer-to-peer lending services offer a different way to borrow money than traditional banks. These online marketplaces put prospective borrowers in direct contact with individual investors. Borrowers without a credit history can get a loan but should be prepared for high interest rates and income verification.

Main characteristics:

  • Interest Rates: from around 5% to 36% APR.
  • Repayment Terms: from one to five years.
  • Minimum and Maximum Loan Amount: $1,000 to $50,000 or more.

get a quick loan with no credit score

How to Build Credit?

If you have a good credit history, you will have no problem getting a loan from a bank, credit union, or direct lender. People with no credit should start building one as early as possible. Here are the best ways to build a strong credit presence:

Consider Experian Boost or UltraFICO

If you don’t have a credit history, it’s worth using additional accounts to build one. This can help:

  • Experian Boost. This service analyzes your utility bills and other services and records the information in your Experian credit report. However, this information is not available to other credit bureaus.
  • UltraFICO. This is a program from FICO that takes into account information about your bank account, cash flow, and transactions. However, not all lenders use UltraFICO to evaluate creditworthiness.

Pay Bills on Time

Your payment history heavily influences your credit score. To protect your rating, make on-time payments on all bills, including rent, electricity, credit card bills, and loans. Payment delays may harm your credit.

Get a Secure Credit Card

Secured credit cards are available to people who have no credit history. The deposit amount is usually equal to your credit limit. If you deposit $500, the credit limit will be accordingly. There’s little risk to the lender, and it’s a good opportunity for you to demonstrate responsible borrowing habits.

You can get your deposit back if you pay off the balance and close your credit card. Additionally, some secured credit card companies offer conversion to a regular credit card if they are satisfied with your creditworthiness and responsibility.

Keep Your Credit Card Balances Low

When you have a credit card, you can build your score by managing how much of your credit you use. Keep the amount you owe below 30% of your total credit limit and ideally below 10%.

Use a Guarantor to Get a Loan

Since getting a loan without a credit history is difficult, you can add a guarantor with a high credit rating. A cosigner is a person who vouches for you and agrees to repay the loan if you fail to do so.

Having a guarantor increases the likelihood of approval and favorable conditions. If the loan is repaid on time, you can build your credit rating. Nevertheless, ensuring your capability to repay is imperative, as late payments will damage your and your cosigner’s credit history, which could cause discord in relationships.

Apply for a Credit Builder Loan

This type of lending is just right for creating a credit rating. The lender sends the money you pay each month to a savings account, and you cannot withdraw it until you pay off the loan. All payment information will be transmitted to the credit bureaus. You can get such loans from credit unions and public banks.

Keep Tabs on Your Credit History Regularly

You should periodically request your credit reports to ensure their information is correct. For example, creditors sometimes forget to inform the bureau that the debt has been paid, and a delinquency appears on the credit history. In this case, it is imperative to fix the errors. Each person can obtain a free credit report once a year by contacting one of the major credit bureaus: Equifax, Experian, or TransUnion.

Become an Authorized User

If you can become an authorized user on someone else’s credit card account, you can build your credit history with minimal effort. However, you should ensure the credit card owner uses it responsibly and pays debts on time. Otherwise, your credit rating will only suffer.

Cultivate a Lengthy and Positive Credit Background

Another factor affecting your credit score is how long you have used a particular credit product. To show a longer credit history, start applying for credit as soon as possible and keep your oldest accounts active.

Minimize Hard Credit Checks

Before applying for a loan, think carefully about whether you need it. The fact is that each application comes with a hard credit inquiry, which lowers your credit score by 5 FICO points. If your credit report often shows signs of hard credit checks, then this may signal that you are in a difficult financial situation. Lenders may think that you are not a very good borrower. Avoid requesting too many new loans so as not to damage your credit score.

Be Careful With the Number of Credit Cards

Start with one credit card if you’re just starting to build your credit score. Opening the second one no earlier than eight months is recommended. Even though FICO and Vantage want to see multiple open credit accounts, applying for several credit cards could mean you’re in financial trouble, causing your credit score to drop.

Bottom Line

Don’t despair if you have no credit history. You may think that getting a loan without one is difficult, but it can be done if you approach the process correctly and choose the right financial product.

Also, remember the steps above that can boost your credit score. Learn more about how to build your credit fast. Strive to use credit products responsibly because a good credit history will later open access to more loan options, low-interest rates, and favorable terms.


Will I Get Approved If I Have No Credit History?

Approval without a credit history depends on the lender, income, and employment stability. While some options are still available, they usually have less favorable loan terms.

If I Had No Credit, What Would My Credit Score Be?

With no credit history, you wouldn’t have a credit score until you establish credit.

Is No Credit History Better Than Bad Credit?

No credit history is generally better than bad credit since it doesn’t carry negative marks.

Without a Credit History, How Can One Establish Credit?

You may consider taking out a secured credit card, a credit-builder loan, or a payday loan. At the same time, to receive a loan, you must be ready to demonstrate your solvency to lenders.

What is a Good Credit Rating?

According to FICO, good scores range from 670 to 739, while VantageScore indicates a good range from 661 to 780.

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Michael Lefler

Written by Michael Lefler

Written by Michael Lefler

Mike Lefler shares his interest in a wide range of different subjects, including his love for finance-related writing. His passion for writing and his years of study led him to become one of the brilliant authors in the massive finance arena and in the area of Financial Planning and Lending Industry.

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