Personal Loans for Borrowers With Limited Credit History
Some online lenders look beyond credit scores to approve borrowers with thin files. See how they decide, what they offer and who they suit.
If you make a steady income, pay your bills on time, and save for retirement, you might expect to borrow money at a low interest rate.
But a limited credit history can outweigh these factors when you go shopping for an unsecured personal loan — even if you have excellent credit scores.
Some personal lenders think they have a way to identify trustworthy — if unestablished — borrowers like you and give them the same rates as other low-risk customers. If you’re financially responsible, you should want someone to look at that and give you credit for it.
Typically, a borrower at this kind of lender:
- has a job
- saves money on a regular basis
- has enough income to cover expenses
- has a retirement savings account
These lenders say they don’t weigh credit scores any more than other factors they consider. That’s why borrowers with thin credit histories or lower credit scores can also qualify for low rates.
What makes these lenders different
They offer low annual percentage rates (opens in a new tab) to the best-qualified borrowers. The lenders say they’re able to do this because they collect and analyze a large number of data points about each prospective borrower.
In a short online application, borrowers provide basic data about their education and employment histories. They also give the lender permission to scan their bank accounts. The lender’s algorithm analyzes every transaction, payment, deposit and withdrawal and uses that to paint a picture of each applicant’s financial habits.
Some lenders say every loan decision is ultimately made by a human.
Their personal loan products also offer flexibility. Once a borrower is approved, he or she can easily alter the monthly payment amount or payment schedule. There are no prepayment or origination fees, and the lender doesn’t charge late fees. Instead, a customer support team works with individual borrowers to avoid default by setting up payment plans or adjusting loan terms.
The bottom line
If you have thin credit and manage your finances sensibly, but don’t qualify for traditional alternatives like 0% interest credit cards, then a flexible, low-interest personal loan from this kind of lender may be a good choice for you.