Buying a car can be scary, especially if you’re a credit ghost! Having a thin credit file can mean having difficulty getting approved for an auto loan, but there are lenders that can work with unique credit situations that could help raise your credit from the dead.
What Is a Credit Ghost?
A credit ghost means that a borrower has a thin file, or doesn’t have much of a credit history. It could mean that someone has never borrowed before, or that they haven’t borrowed in a long time. If this is you, don’t fret – there are lenders that work with no credit borrowers.
Having a thin file usually leads to a lower credit score. If you’re not borrowing credit, you’re not paying on any credit, which can stand to lower your credit score. A thin file can also make auto lenders wary to approve you for a car loan, since you haven’t proven how well you handle different kinds of credit, like credit cards or auto loans. Your credit score is used to determine your creditworthiness, and if you have a low credit score, it can mean a car loan denial.
Many traditional lenders may be hesitant to approve you, since most direct lenders such as banks or credit unions prefer borrowers with good credit scores. If you’ve been called a credit ghost, your dreams of getting into an auto loan probably aren’t dashed – you may just have to look for the right lender.
No Credit Auto Loans
No credit is sometimes a better position than bad credit, since a habitual bad credit borrower may have missed payments, late payments, or repossessions to overcome when they apply for new credit. If your biggest hurdle is a lower than average credit score, a subprime lender could be your answer for auto financing.
Subprime simply means “bad credit,” and the name comes from the credit category that credit bureaus call a low credit score range, usually under 660. Subprime lenders are signed up with a dealership’s special finance department, and they have the resources to work with borrowers in all types of individual credit situations.
You can’t simply apply and get approved, though. You’re going to need to prove you have the ability, stability, and willingness to take on a car loan.
Qualifying for a Subprime Car Loan
Meeting the requirements of a subprime lender means having a stable income and work history, a valid ID, a down payment, and some other documents. Auto lenders like stability, and since car loans last for years at a time, they require their borrowers to submit proof that they are, in fact, steady financially. Since you’re a credit ghost, a subprime lender needs proof that you have the ability to repay the loan, so they look at more than just your credit.
Here are some commonly requested items from subprime lenders:
- Income – Must have a minimum monthly income of at least $1,500 to $2,500 before taxes. This is proven with computer-generated check stubs that also show year-to-date income.
- Living stability – Subprime lenders require that you’ve lived in the same area for around a year, proven with a recent utility bill or bank statement in your name with your current address.
- Identity – Like most major transactions, you must prove you are who you say you are! Proof of identity is satisfied with a valid driver’s license that lists your current address (it can’t be revoked, expired, or suspended).
- Down payment – This proves you’re willing and ready to take on an auto loan. To lower your risk as a no credit borrower, subprime lenders typically require a down payment of at least $1,000 or 10% of the vehicle’s selling price. An equity trade-in can also help meet this.
- Working phone – The lender must be able to contact you, so bring a copy of your recent phone bill in your name. Prepaid cell phones won’t make the cut.
- Personal references – If you qualify for financing, expect your lender to ask for around five to eight personal references with complete contact information, such as name, phone number, address, and email. The only stipulation with these is that a reference can’t live with you.
Now that you know what to expect, you can start gathering your documents and start the search for a subprime lender!
Finding No Credit Financing
Not every dealership has a special finance department, which means not every dealer is equipped to work with credit ghosts with little to no credit score. They’re more commonplace today, but they can be hard to pick out from the crowd. While we have you here, why not begin your search with Auto Credit Express?
We have a coast-to-coast network of dealerships that are signed up with bad credit lending options. To get matched to a dealer in your area with the resources you need, simply fill out our auto loan request form. There’s never a cost or obligation, so start now!