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A Car Loan Without Credit History

Why for most buyers with questionable credit it usually takes more than a good payment history with a credit card to establish car credit and apply for a conventional auto loan
A Car Loan Without Credit History
What we know

To either regain or establish auto credit car shoppers with problem credit may need to apply for a car loan with a higher-risk lender.

Here at Auto Credit Express we know this is typically the case because we’ve spent over twenty years helping car buyers with poor credit locate those new car dealers that can offer them their best chances for approved auto loans.

During that time we’ve fielded thousands of questions from credit-challenged consumers who want to know if they can get a car loan without credit history. Many of them also want to know if a solid payment history with a credit card will allow them to apply for a conventional auto loan.

This is how we explain it:

Those high risk auto loans

Applicants with problem credit often wonder why it should even be necessary to apply for a car loan from a subprime lender. After all, paying cash for a vehicle while, at the same time, making regular payments on a traditional or secured credit card will typically improve the cardholder’s credit scores.

But the fact is this probably won’t bolster the auto credit of these individuals, even if it improves their FICO scores.

The reasoning behind this is that a credit card is a type of revolving credit. With revolving credit if you don’t pay off card balance every month, account holders can pay the minimum amount and carry over any remaining balance to the next month.

An auto loan, on the other hand, is a form of installment credit. With installment credit a contract is signed that requires the account holder to pay back the initial amount, plus interest, for a fixed payment each month over the loan term.

Another difference that separates installment credit from revolving credit is the fact that installment loan balances are usually higher than most typical revolving credit limits. Installment loans also carry a higher monthly payment as a percentage of the loan balance and are much less flexible to changes. This means consumers with installment loans have to be more disciplined.

Credit scoring

In determining your credit scores, FICO and other scorers look at both types of credit. Automotive lenders look at both credit types but also pay special attention to how applicants have paid on installment auto loans. So while a good payment history with a credit card typically will help credit scores this type of activity doesn’t carry as much influence when applying for an auto loan.

For this reason, even auto loan applicants with decent credit scores are sometimes turned down if they’ve never had one or if it turns out they had a spotty payment history with a previous car loan.

What this means is that consumers that find themselves in these situations might have to first establish car credit with a lender that’s willing to take a greater risk.

But if this is the case and/or you’ve been turned down for a traditional auto loan, where do you find a dealer that’s signed up with these types of lenders?

What we do

The first thing you should know is that, in most cases, you have a choice other than a BHPH dealer. Secondly, we want you to know that Auto Credit Express specializes in helping applicants with bad credit find those dealers that can give them their best opportunities for auto loan approvals.

So if you’re ready to reestablish your car credit, you can begin now by filling out our online auto loans application.

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