Background

Many lenders still rely heavily on traditional credit reports, which leaves people who are new to credit—or who have thin files—at a disadvantage. Over the past decade more lenders and credit-reporting services have begun accepting alternative data, widening options for borrowers without long credit histories (Consumer Financial Protection Bureau).

How lenders evaluate applications without lengthy credit records

  • Income and employment stability: recent paystubs, tax returns, or bank statements can substitute for a long credit file.
  • Alternative data: documented rent, utility, and phone payments may be used by some bureaus and specialty lenders (Experian, TransUnion).
  • Collateral or savings: secured personal loans and savings‑secured loans reduce lender risk.
  • Co-signers or joint applicants: adding a creditworthy co-signer shifts underwriting risk and typically improves approval odds.

In my practice advising borrowers for 15+ years, I’ve seen applicants improve approval chances by packaging clear proof of steady income, prequalifying to avoid hard inquiries, and using credit unions or community banks that evaluate applicants more holistically.

Step-by-step strategies that work

  1. Prequalify first (soft inquiry)
  • Run prequalification offers to compare rates without a hard pull. Many online lenders and banks provide a soft-credit prequalification tool—this preserves your credit while you shop. See FinHelp’s guide on personal loan prequalification for how to run a soft check first: prequalification (soft credit check).
  1. Try credit unions and community banks
  1. Use secured or credit-builder loans
  • Secured personal loans (backed by a savings account, certificate of deposit, or other collateral) reduce lender risk and can come with lower rates. Credit‑builder loans are designed to establish a payment history reported to credit bureaus.
  1. Add a qualified co-signer or co-applicant
  • A co-signer with established credit can substantially improve approval odds and interest terms. Understand that missed payments affect both credit reports.
  1. Document alternative income and on-time payments
  • Provide bank statements showing regular deposits, gig income records, or proof of rent and utility payments. Some lenders accept documented alternative data when credit scores are thin (Consumer Financial Protection Bureau; Experian).
  1. Start small and build
  • Consider a small loan or a secured card, make on-time payments, and then reapply later for better terms. Consistent, on-time performance creates the credit history lenders seek.
  1. Avoid high-cost alternatives
  • Steer clear of payday loans and other high-fee, short-term products that can damage finances and make future borrowing harder.

Real-world examples

  • New graduate: Took a small savings-secured loan from a credit union, made 12 timely monthly payments, and later qualified for an unsecured personal loan at a better rate.
  • Immigrant worker: Used stable employment verification and six months of bank deposits plus a co-signer to get approved by a community lender.

Who is affected or eligible

  • People new to credit (students, young adults)
  • Recent immigrants and expatriates returning to the U.S.
  • Individuals who primarily use cash or don’t have credit accounts
  • Those recovering from past credit events with thin current files

Common mistakes to avoid

  • Applying to many lenders at once (multiple hard inquiries can hurt approval odds).
  • Relying only on unsecured offers when a secured option would be more realistic.
  • Failing to gather clear income and bank documentation before applying.

Quick checklist before you apply

  • Pull your free reports at AnnualCreditReport.gov and correct errors.
  • Prequalify to compare offers without hard pulls.
  • Prepare 2–3 months of bank statements, recent paystubs, and tax returns if self‑employed.
  • Consider a credit-builder product or secured loan first.

Frequently asked questions

Q: Can I get a personal loan without a co-signer?
A: Yes. Some lenders approve borrowers based on alternative documentation and income alone. A co-signer increases approval chances and may lower rates.

Q: Will prequalification hurt my credit?
A: No—prequalification generally uses a soft credit check and does not affect your credit scores. Use this step to compare offers before a hard pull.

Q: How can I prove regular payments if I don’t have credit accounts?
A: Provide rent ledgers, utility bills, phone bills, and bank statements showing regular payments. Some bureaus accept rental data reported to them.

Professional disclaimer

This article is educational and does not replace individualized financial advice. Evaluate offers carefully and consider consulting a certified financial planner or loan officer for guidance tailored to your situation.

Sources and further reading

  • Consumer Financial Protection Bureau: materials on credit invisibility and alternative data (consumerfinance.gov).
  • Experian: how rent and alternative data can affect credit files (experian.com).
  • AnnualCreditReport.gov: how to request free credit reports.

Related FinHelp articles

Last updated: 2025. Content intended for education, not as individual financial advice.