As a first-time car buyer, you may not have the best credit score around. Borrowers without a long credit history are likely to have lower credit ratings, which can make it hard to get approved for your first auto loan. Without a cosigner to back you up, it can feel like your options are limited. However, you’ve got two main choices to explore for your first car loan.
First-Time Buyers and Their Credit Scores
Since first-time car buyers are more likely to have lower credit scores, lenders often ask them to bring a cosigner with good credit along for the ride. Cosigners have to sign onto the loan, so their good credit gets attached to it; they also have to promise to pay for the vehicle if the primary borrower can’t.
However, finding a cosigner can be hard. Not everyone has a friend or family member with a good enough credit score that’s also willing to risk their credit for them.
But just because you don’t have a cosigner and you’re new to the game doesn’t mean you’re out of options.
First, Find Out Where You Stand
A good starting point to getting your first auto loan is checking your credit reports and credit score. This way, you can see where you land on the credit score spectrum. You can also look up average interest rates for borrowers in a similar range as you.
Even if you don’t think there’s a lot on them, review your credit reports and make sure everything on them is correct. There are three major credit reporting agencies: TransUnion, Equifax, and Experian. Each may have different information reported, so check all three to make sure everything lines up and looks good.
If you see any mistakes or inconsistencies, you can dispute them and try to get them removed. A negative mark on your credit reports (even if it’s wrong) can lower your credit score, so comb through them carefully.
You can request your credit reports for free from www.annualcreditreport.com. Due to the coronavirus pandemic, the credit bureaus are allowing borrowers to view their reports for free weekly until April 2021. After that, it reverts back to allowing one free report from each bureau every 12 months.
Auto lenders pull your credit reports to see if you meet requirements, so it’s important that you can see what they are seeing.
Auto Lenders to Check Out
As a first-time car buyer, it’s worth your time to ask your own credit union for auto financing if you're a member. Credit unions tend to be more lenient with credit score requirements, since they’re member-owned. If you’re a long-standing member of a credit union, and your accounts are in good shape, you may have a shot if you apply for financing with them.
But as a new borrower, you’re likely to have a bad credit score. Bad credit is generally defined as a credit rating around 660 or lower. Many traditional car lenders have higher credit score requirements, but there are lenders that can work with subprime borrowers. They’re called subprime lenders, and they’re signed up with special finance dealerships.
Subprime auto lenders look at more than just your credit reports. They specialize in assisting borrowers with less than perfect credit, so your credit score is just one piece of the puzzle. Traditional car lenders put a lot of weight on your credit, but subprime lenders examine the many parts of your entire financial situation. This includes looking at your living stability, income, work history, and more.
Dealerships That Can Assist First-Time Car Buyers
Aside from traditional auto lenders out of banks and credit unions, dealers are usually signed up with lenders that you apply with on site. Some dealerships are teamed up with subprime lenders that are able to work with no credit, bad credit, and unique credit situations, such as first-time car buyers.
However, finding the right dealer as a first-time car buyer can be stressful. If you’re new to the car buying game, it can be hard to know what to look for. Skip the hassle of driving all over town looking for the right dealership and get with us at Auto Credit Express.
We’ve been connecting with dealers that have poor credit lending resources for over 20 years, and our network covers the whole country. We’ll look for a special finance dealership in your local area – for free – after you complete our secure auto loan request form. There’s never an obligation, so get started right now!