For borrowers with poor or no credit history, finding a lender that is willing to lend them money – on fair and affordable terms – can sometimes feel like an impossible task.
Some options – pay day loans, for example – have sky high APRs and interest rates. Other, more affordable options are often unwilling to lend to borrowers with poor or no credit history because of the perceived risk.
Why don’t some lenders accept borrowers with poor or no credit history?
In the simplest terms, your credit score is a way that lenders determine the likelihood that you’ll be able to repay the debt you owe. To calculate this, they consider a wide range of information, from whether you’re registered on the electoral roll to whether you’ve missed any payments on existing or previous borrowings.
The final score is then used to determine how likely you are to be able to repay the agreed amounts.
A good credit score simple means that you’re seen as less of a risk to lenders: you have a history of paying money back, on-time and in-full. As a result, you’re more likely to be able to borrow larger amounts at better rates.
A bad credit score suggests the opposite: you have a history of paying money back a late or have defaulted on some debts. (If you’re in this boat, don’t panic. There are lots of things you can do to fix your credit score.)
No credit history, however, doesn’t suggest that you’re a good or bad candidate to lend money to. It means you’re an unknown entity to the lender. As such, you’re a bit of a risk: the lender has no way of knowing whether you’re going to be able to repay your debt.
(If you’re not quite sure what your credit score is, there are lots of free ways to find out your credit score. We recently put together a guide to finding out your credit score without spending a penny.)
But don’t despair, there are lots of options for borrowers with poor or no credit history
We’ve put our heads together and have come up with our top three solutions for borrowers with poor or no credit history.
And although it is incredibly tempting to take the first deal you qualify for – especially after so many companies saying ‘no’ – don’t just settle for the first loan you find. You’re far more likely to find an even better deal if you shop around.
Our Top Tip: Pay attention to the interest rates and the APR – although interest rates are important, the APR is a better indicator when comparing different deals, as it also includes things like fees.
Option One: Peer-to-peer lending
This is a relatively new way of borrowing money, but one that can work well for borrowers with poor or no credit history. Just like asking a friend to borrow money, P2P lending allows you to borrow money from strangers online. You can find a range of strangers willing to lend to people with poor credit – or even no credit history at all – often for much better repayment terms than you’d get at a high street bank.
That said, be cautious. P2P lending is still a relatively new method of lending and borrowing money, and while completely safe, make sure you do your background research.
Option Two: Borrowing from friends and family
OK, this option isn’t ideal. (And if you’re on this post, you’ve probably already tried this.) But if you’re a borrower with poor or no credit history, your friends and family might be able to help.
(This advice is only good for those who are looking just to borrow money, not to repair their credit scores.)
Quite often, family and friends are OK wait until you’re back on your feet to ask for repayments and let you repay it in amounts you can afford. They’re also more likely to be lenient on repayment dates and if you need to miss a payment.
However, remember that borrowing from friends and family may mean that they to dip into their own savings. Don’t be upset or disappointed if they say that they can’t afford it, because there is another way that your family can help:
Option Three: A guarantor loan
Having a guarantor (at Bamboo, a guarantor can be anybody over the age of 21, who has a regular income and can afford to make the loan repayments on your behalf) when you apply for a loan can open up a whole new world of opportunities for people with poor or no credit history.
Because having a guarantor means that, in the eyes of the lender, you are a much safer bet.
Whether you have a poor credit score or no credit history, a guarantor nullifies the perceived risk of lending to you by having somebody agree to make your repayments if you can’t.
This makes you much more likely to be accepted for a loan and for much better repayment terms. And that’s great news because regular repayments on a guarantor loan can fix your credit score in the long run, or help you build a good credit score.
At Bamboo, we offer personalised very bad credit loans that are tailored specifically to you and your circumstances. We also show you exactly how much you could borrow and how much you’d have to repay. And, if you’re accepted, the money could be in your account the very same day. Representative 49.7% APR.
If you’re considering taking out a guarantor loan – why not get an instant quote to see how much you can borrow? It’s quick, easy and – most importantly – leaves no mark on your credit history.