As a borrower without credit, it can feel like you’re stuck between a rock and a hard place. It can be a vicious cycle – you don't have any credit, but you can’t get approved for credit because you have no credit. So, how do you get out of this cycle? We’ve got a few options to help you get started.
No Credit and Car Loans
While you don’t have “bad” credit in the traditional sense (low credit scores due to missed or late payments or other negative marks), having little to no credit history usually causes a lower credit score.
This is because the FICO credit scoring model considers the loans you’ve taken out in the past or ones that you’re currently paying on in order to build your credit report and in turn, your credit score. If you don’t have any credit, your credit score shows a lower score because you aren’t proving how you can handle credit.
Having no credit can sometimes be an advantageous position compared to one where you have bad credit due to past financial issues such as previous bankruptcies or auto repossessions. Some traditional lenders may still be hesitant to consider you for financing with no credit. However, you still have a few options to get started on your path as a new borrower!
3 No Credit Car Loan Options
You’ve got a few choices to start off your credit history as a no credit borrower. We’ve gathered three common car buying options for first-time borrowers:
- A cosigner – Many first-time vehicle buyers enlist a cosigner, typically a family member or close friend. A cosigner signs the auto loan with you, and they help by “lending” you their good credit score to get you approved. Cosigners help you get approved by promising the lender that they can pay for the car if you're unable to. They’re a backup payer, but they aren’t there to make the payments each month. The cosigner paying on the auto loan is a last resort.
- Your financial institution – While you may have a lower credit score, you could have some luck going to your personal bank or credit union. The longer you’ve been a member, the better chance you typically have at getting approved for a car loan. However, you may be asked to bring a cosigner.
- Subprime auto lenders – These are third-party lenders that work through some dealerships, specifically ones that have a special finance department. Subprime lenders have the resources to assist bad credit and no credit borrowers alike. You submit your information to the dealer, and it gets sent to one or more subprime lenders. If you qualify for financing, you’re told what monthly payment you qualify for, and you and the dealership find a vehicle that fits the monthly payment and your individual needs.
If having a cosigner isn’t a luxury that you can get, or your financial institution can’t work with your credit score, a bad credit car loan with a subprime lender could be the way to get your credit history started.
Getting Matched to a Bad Credit Dealership
Not every dealership has the resources to assist borrowers with no credit or bad credit. It can be hard to find which ones work with subprime lenders, but we want to help with that!
Here at Auto Credit Express, we have a network of dealers all over the country, and we’ll look for a dealership that has no credit lending options for you. To get connected and kick-start your credit history on the right foot, fill out our free auto loan request form. It’s secure, quick, and there’s never an obligation to buy anything. Begin your credit journey today!