Personal Loan

4 March 2023

Life can be a journey full of surprises. You can never anticipate when it will throw a curveball. The only aspect in your hands is maintaining sufficient preparation so that you hit a home run rather than lose the game. This is especially true when it comes to money.

Needs, emergencies, dreams, and wishes generally require exorbitant amounts of money to fund. These can sprout to existence at any point in time, and one can never have sufficient funds. You scramble around for fast personal loans and to no avail. You keep facing rejection because you can not avail an instant personal loan without credit score. 

What is a credit score?

A credit score is calculated from the analysis of a person’s financial history and is a representation of an individual’s creditworthiness. Your credit score functions as a metric for lenders, credit card companies, and banks to evaluate the risk they undertake when they lend money to you. 

While the term has been in existence for a long time, most borrowers who apply for instant personal loans hear it for the first time when they face rejection. Then the question arises – how to get a personal loan without credit score? 

The fact is that an applicant who files for quick personal loans for the first time may, in reality, be creditworthy. But their credit score would be low or non-existent since no previous records exist of their borrowing history. This, in turn, makes getting instant personal loans challenging but not impossible. Here is a guide to getting a personal loan with no credit check.  

How Can You Get a Personal Loan Without Credit Score?

Several factors affect credit scores. But when you don’t have a credit history, a variety of other factors come into play. Here’s what you can do:

#1 Leverage Your Income 

A consumer’s income can be a major deciding factor in the sanction of an instant personal loan. For example, if you are employed by a Fortune 500 company and rake in a good salary, it takes considerably less effort to prove your creditworthiness. Primarily, personal cash loans are granted if you are determined to be financially stable and possess the ability to pay back the money borrowed. 

You may be required to produce a few documents when filing for the personal loan – such as your proof of income. The proof of income earned can also be provided in the form of tax returns, typically for the previous two financial years. Or you could share your history of employment and pay stubs. Other essential documents include education certificates and bank statements. 

#2 Apply for a lower personal loan amount

This goes beyond saying that lending is high risk and an anxiety-inducing activity for a lender. A good credit score lowers such apprehensions and acts as an assurance of a safe return of the amount lent. There is a high probability that you, preoccupied with your own worries of procuring a personal loan, might fail to miss the dilemma that occupies a lending party. So how can you boost your chance of being seen as a trustworthy borrowing party? 

A good start would be by lowering the amount of the loan you take out. This acts as a catalyst in substantially lowering the risk and apprehensions your lender may perceive. In other words – since now you are asking for a reduced amount, a lender might feel comfortable sanctioning your personal loan without credit score. 

#3 Get a Collateral Based Loan

A collateral-based personal loan eliminates the requirement of showing your credit score. If you own assets such as gold, real estate, vehicles, FDs or shares, then you can quickly get a personal loan based on them. Here, you need to pledge these collaterals for acquiring a personal loan. 

From a lender’s point of view, the collateral acts as a guarantee of your financial potential in repaying the loans and also as valuables that can be acquired and sold off in case you fail to repay the loan amount. 

Collateral based loans empower you to avail large loans based on the value of the collateral in question. Since these loans eliminate the risk factor associated with the loan amount, collateral-based loans generally come with lower rates of interest. 

#4 Get Yourself A Cosigner

Alternatively, many easy personal loans can be obtained by leveraging the credit score of another individual. Such individuals are called cosigners. A cosigner will apply for the instant personal loan with you, thereby agreeing to pay the debt on your behalf in case you can’t. For example, a spouse with a good credit history can become a cosigner on your personal loan application. The presence of cosigners put a lender at ease.

#5 Get your lender to mark your case with NA or NH in your credit score

You can acquire a personal loan without a credit score by requesting your lender to consider your case with a NA or NH on your credit score. A NA or NH on your credit report indicates no previous credit activity in the last 36 months or no credit history at all. In such cases, your lender may, self-explanatorily, charge you a higher rate of interest than market standards. 

Also, you do not need to fret about any negative influence of NA or NH on your credit report. Instead, by getting a loan with a NA or NH on your report and then subsequently paying it on time, you will substantially boost your credit score. This will aid you in the future when the next time you are out finding a personal loan. Your markless credit history will boost your chances of acquiring a personal loan. As discussed earlier, the only downside you would face is by paying a hefty interest rate on your first loan. 

#6 Leverage Someone Else’s Credit Score

Another way to leverage the creditworthiness of another individual is to ask them to add you as an authorised user on their credit card. This way, you get yourself a credit card under another person’s account, and now their credit card record will reflect in your credit report. In the meantime, you can start building your own creditworthiness.

#7 Rectify Mistakes in Your Credit Score

There is no horror greater than the scenario where you are in dire need of a personal loan, and your credit report reflects a low credit score. Perhaps this is one of the reasons that would’ve prompted you to look up ways to get a personal loan with no credit check. By now, we have established that there are ways of acquiring a personal loan without a credit score. But frankly, you may not need to pursue these ways. 

A possible reason behind your low credit score might be because of errors in your credit report. The likeliness of such a scenario occurring is not that rare and can happen with even the smartest of individuals. Errors like the latest entries missing on your report, wrong name, or incorrect information can paint a misleading report of your credit activities. You should recheck your credit report and get it updated and corrected in these cases. Also, check out our dedicated guide to fixing your credit score.

Also, as a rule of thumb, you should actively get your credit report updated anyway. This one move can considerably shoot up your chances of acquiring an instant personal loan. 

#8 Find The Right Instant Personal Loan Online

Before applying for fast personal loans, it is essential to research extensively for personal loan lenders that suit your needs. Since personal loan interest rates can be very high, make sure to read through the terms of your lender. Getting an instant personal loan online is easy these days since personal loan apps have garnered exceedingly high popularity in recent years. For instance, Fibe is one such instant personal loan app that provides instant personal loans online from ₹8,000 up to ₹ 5 lacs with minimal documentation. The interest too can be as low as ₹ 7/day at times, and you get to choose a repayment tenure between 3-24 months.

How to Build Your Credit Score?

By now, you have multiple options through which you can acquire an instant personal loan without credit score. While apps like Fibe are always available to meet urgent, high-value cash demands, it’s still essential to focus on your credit score. A good credit score ensures that you’re able to acquire a quick loan based on your creditworthiness. Now let’s check out a few ways through which you can start building your credit score:

#1 Get a Credit Card

Getting a credit card is the easiest method for kick-starting your credit score journey. While getting a credit card is not rocket science, knowing a little bit about them can help you build a good credit score. There are primarily two types of credit cards that individuals can choose from – secured and unsecured. 

Banks offer an unsecured credit card based on your previous credit history. This likely eliminates the chances of an individual without a prior credit history getting an unsecured credit card. But, if you have a stable stream of income, then you can still avail of it. Here the proof of your steady income will testify to the banks about your potential in clearing your credit card dues.

But if you are someone with both no credit history and a stream of income, then there’s no need to worry. You can still get a secured credit card. A secured credit card is usually tied to collateral like an FD. So, by applying for a secured credit card you can start building your credit score. 

But as a rule of caution, do change your credit card status from secured to unsecured at the earliest. A bank can misjudge you for being unreliable for credit if you own a secured credit card. So holding a secured credit card for long can have unintended results on your credit history. 

#2 Adopt Smart Credit Card Practices

While getting a credit card is easy and will start building your credit score, what you do with the credit card holds paramount importance. Each activity related to your credit card, right from usage to swiftness in paying the dues is monitored by credit bureaus who then formulate your credit score based on it. So, no second thoughts on how important it is to use your credit card smartly to boost your credit score. Plus, here’s a warning on getting too friendly with credit cards.

• As a rule of thumb, use your credit card up to 40-50% of its limit. This is crucial since your credit card comes with a balance-to-limit ratio, which is the ratio of credit limit and the amount you have spent using the credit card.  If you don’t overindulge in using your credit card, you will not look credit-dependent to credit bureaus. 

Also, little to no use of your credit card might look like a sensible option here. But it will still poorly impact your credit score. Therefore, it is advised to use your credit card once in a while; healthy usage favourably impacts your credit score. Let’s not forget that the goal here is to build the score and not to destroy it. 

• Since now you know how a credit card can help you raise your credit score, you don’t have to apply for a credit card in each bank. While we understand that you have the purest of intentions, this move will backfire. Rushing in to get multiple credit cards will make you look credit-hungry to the credit bureaus. And that is certainly not the impression that you want to have. 
• It goes beyond saying – pay up your EMIs completely and on time. The credit bureaus are regularly updated on your credit card activity by the banks, and a missed EMI is the greatest of all the financial sins. Your credit score will not only get impacted drastically because of your missed repayments but will also hinder your plans of applying for a personal loan. 

#3 Become an Authorised User

As discussed earlier, becoming an authorised user of the credit card of another individual will aid you in getting a personal loan without a credit history. This happens since the credit activities of that card start getting reflected as your own personal credit activities. 

Now, for individuals who were unhappy about not being eligible for an unsecured credit card, here you have an option to get an unsecured credit card registered under your name. But, it is of paramount importance about being careful about your interaction with this shared ownership credit card. Even the slightest error from your end can result in a bad impact on the credit score of the other individual. 

#4 Get a Collateral Based Loan

A collateral-based loan offers a dual advantage. Firstly, as we discussed earlier, you can get a personal loan without a credit score. Secondly, while a collateral-based loan does not require your credit score, being a type of loan, it still impacts your credit score. The swiftness and regularity with which you repay your collateral loan will influence the credit score awarded by the credit bureaus.

In conclusion – it isn’t hard at all to get an instant personal loan without a credit score. All it takes is some careful planning and some help from personal loan apps like Fibe. You can start building up your credit score easily. All you need to do is to take smart steps one at a time. So when are you taking your finances back into your hands?

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