If you’ve got a non-existent credit history, you might be wondering if you could apply for a personal loan. Here, we explain everything you need to know.
Whether it’s spreading the cost of a new sofa or applying for a personal loan, getting accepted for finance can be tricky if you don’t have a credit history. In this blog, we take a look at how a thin or non-existent credit history could get in the way of applying for a loan - and how you can get around this.
What is a ‘credit history’?
First things first, let’s take a look at what a credit history actually is. Your credit history is essentially what it says on the tin - it’s a recorded history of every credit agreement you’ve had for the past 6 years and how you’ve managed them.
Lenders check your credit history to see if you’re a reliable borrower before they agree to lend you money. If you’ve never borrowed before, you’ll have what’s called a ‘thin’ credit history. This means lenders won’t be able to see how reliable you are when it comes to money - which could steer them away.
1) Research the company first
If you’re trying to build your credit history with a personal loan, do your homework and find a bank or lender that’s likely to accept thin credit histories.
2) Check your eligibility before you apply
Many lenders or comparison sites will let you know if you’re likely to be approved for a certain loan before you apply.
With loan comparison sites, you’ll fill out a few personal details, such as your income and address. They’ll use these details and perform a soft search on your credit file (which won’t appear on your credit history for anyone else to see). This gives them a good idea if you’ll be accepted for a certain loan or not before you fully apply - which means you won’t have to leave any unnecessary marks your credit file.
If you don’t have much of a credit history, the loan offers you get accepted for might not seem completely ideal. While many lenders are open to giving you a chance, they’ll balance out the risk of lending to you by charging higher interest fees and or lending you a smaller amount than you might have wanted.
On the bright side, once you’ve paid off the loan in full (paying on time, every month), you should have grown your credit history. This means you could be accepted for more attractive rates and better deals down the line when you borrow again in the future.
What about loans for bad credit histories?
Finding loans for bad credit is a little different. While you do have a history of borrowing money under your belt, lenders will see that you’ve not managed your finances well - like missing payments or defaulting.
This could narrow down your chances of being accepted for a loan, but there will still be loan options available to you. Like applying for a loan with no credit history, it’s important to do your research to find lenders who specialise in bad credit before you apply.
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