Many auto lenders ask bad credit borrowers to have a cosigner, but not everyone has that type of advantage. Even if you find a cosigner, it’s not a 100% guarantee that you can drive away with a car. Luckily, there are other bad credit auto loan options for you to explore, and ways to improve your credit for when you’re ready to apply.
Get a Car Loan Without a Cosigner
If you’ve been asked to bring a cosigner when you apply for a car loan, it likely means you have a lower credit score. Cosigners help borrowers get approved for auto loans because they lend you their good credit rating, and lower your risk of default.
However, if you can’t find a cosigner, you’re not alone. Having a cosigner means finding someone that’s willing to put their good credit score on the line, and someone that has enough disposable income to qualify as a cosigner. Without a good credit score or enough income, a cosigner is no good and doesn’t improve your approval odds.
If you’re getting turned away for a car loan because you have a lower credit score and can’t find a cosigner, consider these three possibilities.
1. Give Yourself Some Time to Heal!
This may not be what you want to hear, but if your credit score is suffering and you can’t get approved for new credit, you could take some time to repair it.
Building a good credit score can be hard if you’ve never borrowed before, and it’s hard to get approved for new credit in the first place if your credit score is low. The solution? Smart credit building strategies, such as:
- Pay down your credit cards – Your credit utilization ratio is a large part of your credit score, and it compares how much you owe on your credit cards vs. how much you’re allowed to borrow. If your credit cards are over 30% of their spending limit (or maxed out), then it’s hurting your credit. Pay down your credit cards as much as you can, and then check your credit in a month, since lenders usually report once a month. You can request your credit reports for free at www.annualcreditreport.com.
- Consider a secured credit card – Secured credit cards are usually pretty easy to get into, because they’re secured with your own cash. To get a secured credit card, you have to provide a deposit. The size of your deposit is usually the spending limit on the card. If you close the account while there’s still a balance, your deposit covers the amount, so there’s not much risk for the lender, making them much easier to get approved for over traditional credit cards. While you have to pay a deposit, these cards are reported like traditional credit cards so they can help build your credit history.
- Become an authorized user – An authorized user is someone that’s allowed to use someone else’s revolving credit (credit card). If you were to become an authorized user, you typically get your own credit card that's linked to the primary borrower’s account. Any activity done on the credit card is reported on your credit reports. This can be a great way to build your credit score if you can’t get approved for credit on your own, but you need someone to agree to it.
- Review your credit reports – Mistakes on your credit reports can cause a lower credit score, so it’s worth it to review them and make sure everything is shipshape. If you find a mistake on your reports, you can dispute it and have it corrected. All three major credit reporting agencies allow you to submit disputes online. If you find multiple errors and you’re not sure where to start, you use a credit repair company that can dispute accounts for you, for a fee.
Regardless if you choose to wait until your credit score is the highest you can get it, you can still use these credit building tips usually anytime. Additionally, one of the best things you can do for your credit score is making all of your payments on time. Avoid getting any accounts sent to collections and getting late or missed payments on your credit reports that sour your credit score.
If you needed a vehicle yesterday, though, then consider the next two bad credit auto loan options.
2. Buy Here Pay Here Dealerships
Buy here pay here (BHPH) dealerships are a one-stop-shop for many bad credit borrowers. The thing that makes these dealers unique is that they utilize in-house financing, where the dealership is also your lender.
In-house financing means there’s usually no credit check, which draws many bad credit buyers to these used car lots. If you can’t find a cosigner and you’re having issues getting approved by traditional lenders, then in-house financing may be for you because a lower credit score isn’t likely to stand in your way of an auto loan approval.
BHPH dealers require a down payment, sometimes around 20% of the vehicle’s selling price. With in-house financing, interest rates tend to be higher than average. However, the large down payment requirement and a higher interest rate could be seen as the trade-offs for getting into a car loan without the credit check.
However, since the BHPH dealerships don’t generally check credit reports, their loans may not be reported to the major credit bureaus, either. This means your auto loan wouldn’t be helping to boost your lower credit score. To improve your credit score, you’d have to use other credit building strategies. But if you need a vehicle quickly and don’t have time for credit repair, then a BHPH dealer may be just what you need in the meantime.
3. Subprime Auto Loans
Where traditional car lenders typically ask their borrowers to bring a cosigner if their credit score is below their credit score requirements, subprime lenders assist borrowers with credit issues. Subprime lenders are third-party lenders who are signed up with special finance dealerships.
Subprime auto loans are reported, meaning that your timely payments can rebuild your credit score – two birds with one stone (or car loan, rather).
There are many reasons why a borrower may have less than stellar credit, so when you apply with a subprime lender, they examine the many parts of your financial health alongside your credit score. This typically means requiring that you meet a certain income level, have had a stable residency and work history, have a down payment, and a few other things that prove you’re ready to take on an auto loan.
Subprime lenders are typically more concerned about your overall stability, ability, and willingness to pay for a vehicle rather than your low credit score. If you want to repair your credit and get the car you need, then subprime financing could be your next step.
Not Sure Where to Start Car Shopping?
Looking for the right lender or dealer can be stressful, and even more so when your credit score isn’t great. If you can’t find a cosigner to give you a credit boost, you don’t have to go it alone! Here at Auto Credit Express, we’ve made it easier to get the connections you need.
We’ve gathered a nationwide network of dealerships that work with bad credit, no credit, and even bankruptcy. To get matched to a dealer in your area for free, complete our auto loan request form.