Many people find themselves in need of a loan. It might be to redecorate their home, or to help towards wedding costs, or even to take care of an emergency. Whatever the reason, there may come a time when you need to apply for a loan, and you may wonder if you need a credit history to be approved.
What Is A Credit History?
Your credit history is an account of your financial past. It includes details of any loans, credit cards, and utility bills you have. It includes if you missed payments, or made late payments. It’s used in calculating your credit score, which is what potential loan lender will look at when they decide on your application.
Credit reports are held by three credit bureaus – Experian, Equifax, and Transunion. Any time you apply for credit, whether it’s a credit card, an installment loan, a flexible loan or a personal loan, the lender will request a copy of your report from one, or all of the bureaus. You can also request a copy of your report. You are entitled to a free copy of your credit report every twelve months from each of the credit bureaus. You can request further reports, but these will require a fee.
Why Should You Check Your Credit Reports?
You should check your credit reports on a regular basis, and make sure that you read them carefully. There may be mistakes or errors, and you can dispute any transactions that you believe to be wrong. You will need to supply copies of any documentary evidence you have that supports your claim. Always make sure that you send copies and not the originals.
What To Do If You Have No Credit History
Some people have never taken any form of credit, which means that they cannot show any lenders that they are a reliable financial risk. They have no history of paying off debt or showing that they have a good sense of their financial management. This can mean that traditional lenders will refuse any application for a loan. However, some direct loan lenders may be more willing to help you.
You should research direct lenders, and online loans before you make any other decisions. If you can’t find a loan lender who will approve your application, then you will need to build your credit rating, before you apply for a loan.
Sophie Reid is an account manager at creditcube.com, an online lender. She says clients often ask her how they can build up their credit rating. She says there are a few reasons why, “Some clients are relatively young, and this is their first time applying for loans, others have only ever spent money they had, and simply haven’t ever really needed credit before, so when they need a loan, there’s no background to show if they would be a good credit risk for lenders.”
Ms. Reid often gives them advice on how they can build up their credit. First of all, she recommends that they have at least one utility bill in their name. Utility bills are included in your credit report, so make sure that you pay them on time. If you are having difficulty making payments, then you should call the company, and explain. Most companies would be willing to work out a payment plan with you that you can afford.
Secondly, she suggests that clients consider taking out a credit card. You should think about your spending habits before you apply. If you can pay off the debt in total at the end of every month, then you may want to research cards that have other rewards as well. If you think you’ll be making partial payments at the end of every month, then you should look at cards with a low-interest rate. If you manage the card responsibly every month for a short period, you should have built up enough of a credit rating for an alternative lender to consider your application seriously.
Thirdly, Ms. Reid suggests that you only approach reputable lenders. There are some classified ads available online claiming that you can take a personal loan, with no credit check. Ms. Reid says that the vast majority of these are scams. She says clients should thoroughly research lenders, and the various lending options they offer, or they could find themselves in financial difficulty. She also said that some lenders would take advantage of clients with little or no credit history, and offer loans with extremely high interest rates. She said that what you need to look for is a lender, with a reliable history, a good reputation, and clients with a positive experience. Many of her clients return to creditcube.com for future loans because they had such a positive experience in the first place.
In short, it is possible to get a loan without a credit history, but you should only approach reputable lenders. You should also look into ways of building up your credit history, whether by taking out a credit card, or a small short-term loan from an online direct lender.