Being in the domain of digital lending, we receive hundreds of personal loan applications each month from borrowers who don’t have a credit history. We provide personal loans, to borrowers, based on the credit bureau score. This score is calculated from your credit bureau report, which contains all your credit related transactions. A borrower is said to have no credit history, if he/she has neither availed a loan (secured or unsecured) earlier nor made use of any credit card. Before we dig deeper into details of zero credit history, and how it affects your chances of getting new credit, let’s look at what a credit history comprises of.
Credit history is a record of your credit transactions and payment behavior. Maintained by a credit bureau, like CIBIL, a credit history is compiled from multiple sources. Banks, Credit card issuing companies, collection agencies and government – all send your credit related information to the credit bureau. This information indicates how responsible you have been with your credit card bill payments and loan EMIs. Your credit history is made up of information such as the number and types of credit accounts you own, the duration of your credit card account, the total loan amount you owe, etc.
The credit history also records the number of times you have applied for fresh credit. Every time you go to a financial institution for credit, a hard inquiry is made to the credit bureau.
A high number of inquiries on your credit bureau report indicate that you are desperate for credit and this can in-turn affect your credit bureau score. Also, when you apply for a credit bureau report directly from the bureau, your credit bureau score is affected as the bureau still treats this as a soft inquiry. A soft inquiry is not reflected in your credit history but it does affect our score.
In response to a hard inquiry, the bureau sends your credit bureau report back to the requesting credit institution. Based on the calculated score, your loan is either approved or rejected. Credit institutions like to see how prompt you are with regards to your repayments. It is therefore very important to maintain a positive credit history, to get a personal loan quickly and smoothly. A healthy credit history is an indication of your financial reliability and trustworthiness.
No Credit History
No credit history simply means that you do not have anything related to credit on your history. You have not borrowed money, from any financial institution, in the past. You never availed a credit card facility. It is fair that you never felt the need to borrow money in your life. It could be that you were a student, a non-professional, and hence had no credit history.
Banks and credit card companies are skeptical to provide credit to borrowers who have no credit history. As personal loan and credit cards are examples of unsecured loans, the credit history is the only way they can mitigate the risk of default. They cannot gauge how your repayment capability would be if the credit is approved. No credit history is as good as bad credit history for them.
This is highly unfair on individuals who are salaried but never felt the need to avail credit before. Now that the need arises, you have nowhere to go. Your only quick finance option, of personal loan, won’t be approved of. But hang on a minute… Maybe, there is a way to get a personal loan after all.
What can you do if you have ‘No Credit History’?
The bad news is that without a credit history it is almost impossible to get a personal loan from a bank. The good news, however, is that you can get a personal loan from Loan Singh with no credit history. You only need to be working and be salaried, for the last 3 months. So it does not matter if you never applied for credit before and your credit history is zero. If you have been working since the last 3 months you can apply for a personal loan at Loan Singh.
To be eligible for a personal loan with Loan Singh, you need to provide your latest 6 months bank statement so that we can see the steady in-flow of monthly income – even if you have been working for only 3 months.
How can you build a good credit history?
Once you get a personal loan from Loan Singh, it gives you a great opportunity to build a good credit history. By being prompt with your loan EMI repayments, you not only build a good credit history with the credit bureau, but you also do so with Loan Singh. Let’s looks at 2 ways by which you can improve your credit history.
Be Self Aware
Apply for your credit bureau report from time to time – to check for any errors in your credit history. Also check for frauds and identity theft. Report them to the credit bureau immediately, or else the errors will remain on the report generated.
Be prompt with your loan EMIs
Build self-discipline to pay the loan EMIs on-time. Set up auto debits or auto payments to never miss any EMI due-date. Loan Singh will provide you with a dashboard to keep track of all the EMI information. So, all you need to do is simply pay the EMIs. Make sure you budget your expenses well to never fall short on EMI payments.