If you’re a new borrower, or your credit history is limited, then your credit score may not look too great at a first glance. However, if a lender dives deeper into your actual credit reports, it can tell a different story, and there are lenders able to assist borrowers that don’t have credit.
What’s Considered Bad Credit?
The good news is that a no-credit borrower isn’t likely to be considered a “bad” credit borrower necessarily. Nobody starts off their journey with a perfect 850 credit score – it’s usually somewhere in the lower to middle range of the spectrum when you’re first starting out.
The FICO credit scoring model assigns credit scores between 300 to 850, so, as a no credit borrower, you’re likely to land somewhere in the middle. Many lenders may consider a borrower that doesn’t have a credit history more favorably than a borrower with a similar credit score and a lot of negative marks on their credit reports.
Traditionally, a true bad credit borrower may be someone with multiple missed or late payments, bankruptcy, one or more vehicle repossessions, accounts in collections, or defaults with previous creditors. To a lender, lacking a credit history can still be viewed as risky, but it’s likely to be received better than a borrower with multiple negative marks that caused a drop in credit score.
However, any borrower with a credit score below 660 may struggle to get loan approvals.
As a new borrower, a lender may proceed with caution when considering approving you for a loan. Without a long-standing credit history, you haven’t yet proven your ability to repay different credit accounts on time or manage a full plate of credit. However, if you apply for new credit with lenders that consider more than your credit score, you can prove your creditworthiness in other, more tangible ways.
Getting Your Credit History Started
Many new borrowers start off their credit history with a credit card or auto loan, often with the assistance of a cosigner. A cosigner’s someone who lends you their good credit to help you meet credit score requirements, and they reduce the chance of the loan falling into default because they’re a backup payer. Having a cosigner can be a great way for a new borrower to get their feet wet and get their first loan approval.
However, not every borrower has a cosigner to come along with them, and if that’s you, then a subprime car loan could be a good way to start acquiring a payment history and build your credit score.
Subprime lenders are auto lenders signed up with special finance dealerships. They often have first-time buyer programs, assist borrowers in unique credit situations, and even work with borrowers who’ve gone through bankruptcy. They do this by looking at outside factors alongside your credit reports, such as income, living stability, and work history.
Traditional auto lenders, such as banks or credit unions, may see a low credit score and turn you down for vehicle financing. Often, a credit score that doesn’t meet requirements is enough of a reason for denial. But by applying for new credit with lenders that are equipped to work with poor credit, you can increase your approval odds if you meet the other criteria.
No Credit Borrower Auto Loans
If you’re ready for a car loan and a way to start filling up your credit reports, then we have some guidance to help you prepare for subprime financing.
Subprime lenders typically require:
- A consistent work history without gaps longer than 30 days between jobs
- A minimum monthly income of around $1,500 to $2,500 (before taxes)
- A recent utility bill in your name proving your home address
- A recent phone bill proving you have a working cell phone or landline
- A list of five to eight personal references
- A valid driver’s license
- A down payment of at least $1,000 or 10% of the vehicle’s selling price
Depending on the lender you’re working with, and your individual situation, you may need more or fewer items to prove your ability to repay a car loan – but those listed above tend to be the basic documentation required.
Finding a No Credit Auto Lender
Locating an auto lender that can help get your credit history off the ground isn’t always easy, but we want to help make your car buying experience easier, here at Auto Credit Express.
Instead of wasting time and energy searching for a special finance dealership, let us handle the search by connecting you to a dealer in your local area that’s able to assist bad credit borrowers. Get started right now by filling out our free auto loan request form.