Auto loans can be a great way to start establishing credit. It may sound like a vicious cycle: you can’t get approved for a loan without credit, and you can’t establish credit without getting approved. But there are options for those with no credit history who want to start earning positive credit. You just have to know where to begin!

Can You Buy a Car with No Credit?

Anytime is a good time for consumers with questionable credit to improve their chances of getting approved for auto loans. But can you really buy a car with no credit? The answer of course is yes, you can buy a car with no credit, especially if you're paying in cash. However, most consumers with little to no credit history typically don't have $50,000 in cash lying around, and that is what it takes to buy a new car these days. The average price of a new car in December of 2023 was around $49,000 according to

A better question might be whether or not you can finance a vehicle with no credit, and this can depend on several factors. Here's what we know about getting a car loan with little to no credit history.

How to Buy a Car with No Credit?

There are several things you can do to help yourself when it comes to the process of financing a vehicle. Whether you're buying new or used, your credit plays a major part in what you can finance.

How to Buy a Car with No Credit History

Double Check Your Credit History

If you’ve never had a car loan, mortgage, or credit card, you may not have a credit history, and you’re considered to have a thin credit file. Your ability to get a new loan is also based on your ability to repay a loan – not just your income. Without a record of how you’ve paid on loans in the past, lenders can be hesitant to approve you with no credit history.

Loans aren’t the only things on credit reports; utility bills, phone bills, and medical bills can be reported, too. To find out what’s on your credit reports, you can request yours from the three major reporting agencies: TransUnion, Experian, and Equifax. You can request one from each agency, at no charge, once every week. The policy changed from once every 12 months after the pandemic, and now it's easier for consumers to stay on top of what's in their credit reports.

All three are likely to have differences, so comb through them carefully. If you have any negative accounts that shouldn’t be there, you can dispute them. If they’re proven to be inaccurate, the bureau(s) is required to remove them from your credit report(s).

If you have negative accounts on your credit reports, they can remain for seven years, which can hurt your credit score. If you’re trying to get an auto loan for the first time, you should clear up any outstanding issues before applying. If you can’t remove them, it still helps to know where you stand.

Revolving Credit to Build Credit History

If you’re not ready to buy a car, beginning your credit history with revolving credit can be a great starting point. Revolving credit consists of things like credit cards and personal lines of credit. If you’ve never had an installment loan (like a mortgage or auto loan), a credit card can be an easy way to start your credit history. The length of your credit history, or credit age, which is how long you have used credit, determines 15% of your credit score.

By opening a credit card account and managing it correctly by making your payments on time, you can start a positive credit history. Keeping a balance below 30% of your credit card limit is a good rule of thumb. Borrowers who tend to overdraft or max out their credit limits are viewed as riskier by lenders and credit score formulas.

Credit cards have set minimums that you must pay each month, and if you can’t afford the minimum in your budget, don’t use the credit card. This could start your credit history on the wrong foot, which is the opposite of what you’re trying to do when building credit!

Find a Cosigner to Increase Chances of Approval

If you’re getting turned down for auto loans because you have no credit, finding a cosigner could be a great solution. A cosigner lends you, the primary borrower, their good credit score to help you qualify for a car loan. The cosigner also assumes responsibility for your auto loan if you can’t make payments or default.

If you make your car loan payments on time, you and your cosigner can both earn a positive credit history. However, the opposite is true, as well. If you stop making payments or default on the loan, both of you will see negative entries on your credit reports.

Subprime Financing Through Dealers

When you have no credit or bad credit, some dealerships work with lenders that can help in these credit situations. These subprime lenders examine more than just your credit reports, and they know that people are more than just a credit score. By using income and work and residence stability in addition to your credit history, they may be able to approve you for a loan when other lenders won’t.

Not all dealers have special finance departments, and there are more requirements for a subprime auto loan than a regular auto loan. Subprime car loans also require a down payment of at least 10% of the vehicle’s selling price or $1,000 (sometimes whichever is less).

The Bottom Line

At Auto Credit Express, we want to help connect you with a dealership in your local area that can work with you, even if you have a thin credit file. We’ve gathered a network of dealers with special financing lenders that work with people with less-than-perfect credit – or no credit at all. To see if you qualify, get started by filling out our free auto loan request form!