young people trying to get a small loan but with no credit score

chrisbobman

I have been looking into loans on behalf of a friend as he has no real credit rating as he's young and paid everything out right and it has now become a issue as he is looking for a short term loan of £1000 and repaid in a year however as he hasn't had anything to show his credit score or his money management all the websites for a loan without a ridiculous APR will deny him and I was wondering what he could do short term to boost his score or get a loan?

Ebe_Scrooge

There is no quick way to increase your credit rating (ignore the score, it's neither seen nor used by any lender).  The usual advice is to get a credit card, use it for everyday spending, and always pay it off in full every month on time.  Your friend will likely only be able to get a card with a very high APR, but that doesn't matter - as long as it's paid in full every month, there will be no interest to pay.  Any other form of credit, such as a phone contract, will also help to build up a credit history.

As you've found out, with no credit history a lender has no data to assess your friend's credit-worthiness, therefore they impose a higher APR to offset the increased risk to them.

The obvious question would be, why does your friend need £1000 so urgently ?  There are very few things in life that are so urgent they can't wait until you've saved up for them.  If it is genuinely that urgent, and a loan is the only option, then he could try approaching the bank he currently has an account with - they can, at least, see how he's been managing his money in the past, so may be prepared to offer him a loan at a more reasonable rate.  But really, the most sensible advice is to question whether the loan is really necessary in the first place. 

Fighter1986

If he's desperate for such a small amount of money then it suggests he's in a very dicey, unstable financial situation, and therefore a high risk borrower. Lenders can see this. Their assessment techniques are highly advanced. 

He should be able to save a grand in a couple of months unless there's a serious issue with his income / expenditure - in which case, this needs fixing. You can't borrow your way out of poor finances. 

DCFC79

chrisbobman said:

I have been looking into loans on behalf of a friend as he has no real credit rating as he's young and paid everything out right and it has now become a issue as he is looking for a short term loan of £1000 and repaid in a year however as he hasn't had anything to show his credit score or his money management all the websites for a loan without a ridiculous APR will deny him and I was wondering what he could do short term to boost his score or get a loan?

Its not the score thats important but the history.

Why does he need the loan ?
He could see if he can get a credit card, google credit building cards, one is mentioned.

macman

How will he service this loan?