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A fair amount of research will tell you that banks do sanction loans to those without a credit history. However, they do so under a very limited set of circumstances. To begin with, it is highly unlikely that a person with any sort of bank related experience will be left with out a credit history. Even if the person has applied for no loans, the chances are that the individual will have a useable credit history. Most often, the people without credit histories are students, and/or first time bank users.

When a bank receives an application for a loan from a person with no credit history, the first thing that the bank will do is to find out why the person has no credit history. Like mentioned above the only reasons why one not have a credit history is because the individual is a student and/or because they are first time bank users. The procedure followed in either case is marginally different.

If the applicant is a student and the loan required is an educational loan, then the bank will consider the application and analyze the other details proffered. The personal details including the list of valuable assets legally ascribed to the individual are noted.

The bank may also ask the student to submit details of the collective property of all family members. If these details are in order, then the bank will ask for the applicant to bring in a co-signer who does have a workable credit history. This co-signer will stand in as the guarantor for the applicant. If the applicant fails to make the loan payments, then the guarantor will have to make the necessary payments. In most cases, the guarantor is a family member or guardian. In such cases, the risk factor for the bank is considerably lower. The loan is sanctioned based on the record of the co-signer. Most student loans follow this procedure.

If the person has no credit history because of a lack of prior relationship with a bank or financial agency, then the bank will ask for statement of other payments that the applicant has made. Rent payments, credit payments to shops etc are considered are records in the absence of a credit history. Statements of recommendation from these sources may be required by the bank. The procedure gets more stringent according to the sum of the loan applied for.

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