How to get a loan (any kind) with No Credit Score

Question

Hello, BP!

Is it possible to get a loan with with No Credit Score?

Andrew Postell · Answer

@Jose Antonio Flores yes, no credit score is usually ok with many loans.  Some will have requirements like "show us your utility bill" or something like that instead to show that you can pay SOMETHING on time and responsibly but no credit isn't a deal breaker.  BAD credit = bad.  GOOD credit = good.  NO credit = possible but more requirements.

Cara Lonsdale · Answer

Most hard money lenders also don't use your SS to obtain the loan since they usually qualify the property, not the borrower.  So, he would not necessarily be able to establish credit this way.  He would have trouble when it came time to refinance into a more reasonable conventional loan.  So, before going the hard money route, make sure you know how that will report or not report to your credit bureau, and have a good exit strategy planned before you commit to a high interest rate and short term hard money loan.

If short term is the goal (for flips), then this would be a viable option to consider.

Michael Kinsella · Answer

@Jose Antonio Flores

Some HMLs/private lenders don't have credit score requirements.

This makes sense as your credit score is a good indicator of long-term creditworthiness, but in the short term (like the typical term length of a hard money loan) factors like liquidity are more predictive of timely repayment.

Best,

Michael

Cara Lonsdale · Answer

Building credit is easy.  The key is to not go crazy with opening up a bunch of credit cards, but rather be smart about what accounts you open.  Have a plan for your charges, making on time payments, and paying the balance off within a quick amount of time to avoid costly finance charges.  Consider purchases that you would already be making, but instead of paying in cash, put them on your new card, and put your cash on the card to pay it off.  You might even consider choosing a card that has a promotional starting interest rate of 0% or some small percentage.  This way, you can let your balance ride for a few months while you make timely payments and establish good payment history before paying off the balance before the promotional interest rate drops off.

Don't wrack up your card with unintended purchases, or impulse purchases.  The line of credit is a business tool for you to use on your investing journey.

Also, make sure you diversify your types of credit.  Don't open a bunch of credit cards.  A credit profile that has a credit card, a car payment and a personal loan (and of course Real Estate) would make a good mix for creditors to consider, and the credit bureaus to evaluate for a score.  Again, make sure you have a plan for paying it off.  Don't extend yourself beyond what you can pay back if required.

There are types of alternate credit that can be used.  Payment history on your utility bills, cell phone, and other types of bills can be used to establish credit.  Go to the credit bureau sites and investigate what they will consider to give you a credit score.

FHA will be your go-to lender for starting out (beside Hard Money Lenders with higher interest rates).  Your first deal might need to be a house hack in order to use the FHA loan, but you will be surprised how quickly a year goes by, which is the FHA requirement for occupying the home.

Lastly, if you find yourself having trouble getting anyone to give you a credit card or loan, consider a pre-paid credit card.  These allow you to place a deposit on the card, and have a credit limit equal to that deposit.  These still report to the credit bureaus for payments made, time they are open, and usage history.

Aaron K. · Answer

Yes, but it is a lot easier with a credit score, so best practice is to start building your credit history.

How to get a loan (any kind) with No Credit Score

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