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How to apply for credit with no credit

How to apply for a personal loan
How to apply for a personal loan © Andresr/Shutterstock.com

The ability to get a personal loan without credit history is much harder than getting a credit.

"Banks operate on risk, and they have to properly underwrite loans to make sure they are making prudent loans to people who can pay them back," says David Pommerehn, senior counsel for the Consumer Bankers Association.

In most cases, the consumer would need to borrow against their home to get a personal loan with no credit history. That may work for Americans who have paid their debt obligations, including a mortgage. In the absence of a credit file, the bank will look long and hard at a person's income, other assets and the value of their home, Pommerehn says. In special circumstances, banks may consider other forms of collateral besides a home.

"It would be on a case-by-case basis," says Pommerehn. "It would be a unique circumstance if another form of collateral was used."

Otherwise, the options are limited. Consumers can get a co-signer to qualify for a small loan if a family member or friend is willing to take the risk. A handful of banks are toying with loans that consider direct deposit history of paychecks and allow consumers to borrow part of the deposit amount, says Pommerehn.

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