How to get a loan with bad credit—or no credit

Not having a credit history is more common than you may think—and it doesn’t mean you’ve done anything wrong. It simply means you may not have had the opportunity or the need to use credit yet, making it difficult for lenders to evaluate your past borrowing habits. Maybe you’ve never had a credit card, loan, or line of credit, or perhaps you’ve avoided borrowing in the past. It could also mean you’re new to the U.S. credit system or that your previous accounts are old and no longer reported to credit bureaus. This is what’s known as having “no credit” or a “thin credit file.”

No credit isn’t the same as bad credit, and there are some actions you can take to start building your credit history. These may include:

• Report on-time rent payments. Some services allow landlords or third-party companies to report rent payments to credit bureaus. This can be an easy way to add a positive payment history.
• Become an authorized user on a credit card. If you have a trusted friend or family member with a positive payment record, becoming an authorized user can allow their strong history to appear on your credit report.
• Use a credit builder loan.
• Make on-time bill payments. Maintaining a positive payment record is one of the most important factors in building a strong credit profile.

Having a low credit score may limit some of your borrowing options and may not qualify you for the most favorable loan terms. However, it doesn’t necessarily mean you’re out of luck when it comes to loans. There are some loans and credit-building tools designed for people working to improve their credit profile. Each may have different eligibility criteria, lending limits, and cost considerations.

Here are some of the most common:

A secured loan uses something you own—such as a car or a savings account—as collateral. They’re generally best for borrowers who need to use collateral given a poor credit history, or those who may want to take advantage of interest rates lower than those with unsecured loans. Staying current on payments helps you keep ownership of your collateral.

• Lower credit scores may be accepted for a secured loan if the collateral has adequate value.
• Proof of income may be required, depending on your loan type.
• Lending amounts can range from a few hundred dollars to several thousand, or even up to hundreds of thousands in some cases.
• Interest rates can vary widely, depending on the type of collateral and your income, along with other factors.

A cosigner is someone with stronger credit who can help you qualify for a loan and potentially secure better interest rates. This option can be good for someone with a trusted family member or friend who is willing to cosign.

• The cosigner must meet the lender’s credit and income standards.
• Both the borrower and cosigner share payment responsibility.
• Loan amounts are like personal loans and vary by lender.
• Interest rates can vary based on the cosigner’s credit profile.

A secured credit card requires a refundable security deposit (typically your credit limit). It’s designed to help you establish a positive payment history and improve your credit over time.

• Generally open to borrowers with low or limited credit.
• Requires a security deposit – typically a few hundred dollars.
• Your credit limit is usually equal to your deposit.
• Interest rates vary by lender.

Credit unions are member-owned, meaning they may be more flexible with credit requirements and may offer lower fees.

• You must be a credit union member.
• Income verification is required.
• Loan amounts range widely depending on the credit union.
• Interest rates may be lower than banks or online lenders.

If you have bad credit or no credit, it may be tempting to accept the first loan you qualify for. But it’s important to proceed with caution. Payday loans, title loans, and pawn shops may promise fast cash with no credit check—but these loans may come with extremely high interest rates, short repayment windows, and high fees. Loan terms and availability vary by lender and state.

Some red flags to watch for:

• No credit check. If lenders skip a credit check, they may compensate for it with high interest rates that make your loan expensive to repay.
• Upfront approval or processing fees. Lenders generally do not charge you for applying.
• Urgent tactics. If a lender is pushing you to agree quickly or using high-pressure sales tactics, be cautious.
• Hidden or unclear loan terms. If a lender doesn’t explain due dates, fees, or your total repayment costs, this can be a red flag.
• Short repayment windows. Some of these loans require repayment within weeks, which may not be realistic and can lead to rollovers or additional fees.

A higher credit score can lead to more favorable loan terms, lower interest rates, and more borrowing options overall. You can’t raise your credit score overnight, but there are some steps you can take now, and you can develop habits that will help you build long-term financial health.

These actions can make a difference in your credit score within a few weeks to a few months:

• Check your credit report regularly. This helps you spot any potential errors, such as incorrect balances or accounts you don’t recognize, that may be affecting your score. You can dispute any inaccuracies you see with the credit bureau.
• Make on-time bill payments. Even one late payment can hurt your credit score.
• Reduce your credit card debt. Lowering your credit utilization (the percentage of your available credit you’re using) can boost your credit score. Staying below 30% utilization is typically recommended.
• Report rent or utility payments as a quick way to boost your payment history.
• Avoid opening multiple new accounts. Multiple credit applications in a short time can temporarily lower your score.

Adopting these habits can help strengthen your credit, given several months to a year or longer:

• Build a consistent payment history. It’s one of the most important factors in your credit score and shows lenders you’re reliable.
• Improve your debt-to-income (DTI) ratio. Paying down your debt, or increasing your income, helps improve your overall financial profile.
• Keep older accounts open. The longer your credit history, the better.
• Use credit building tools wisely. Secured credit cards and credit builder loans can improve your score over time.
• Be mindful of your overall credit mix. Having different kinds of accounts—for example, installment loans and revolving credit like credit cards—can positively impact your credit score.

Bad credit or no credit history doesn’t define your financial future. While it may limit some loan options today, understanding how to build or rebuild your credit profile can put you back in control. By choosing borrowing options carefully, avoiding risky offers, and taking small—but consistent—steps to strengthen your credit over time, you can open the door to more opportunities in the future. It may take time, but with the right approach, you can move forward with greater confidence.