Getting a new car can be an exciting time, but qualifying for an affordable car loan can be difficult if you have 0 credit history. Thankfully, there are a few ways you can qualify for an auto loan, although it may not be for the car of your dreams.
Since your credit score and report can be the biggest factor in determining if you qualify for an auto loan, having a long credit history can really help. But even if you have never had a credit card and have no credit history, there are a few things you can do to get yourself a car. What’s great about auto loans is that they can be an effective tool to increase your credit score.
Check Your Reports and Score
Even if you are certain you have no credit history, it never hurts to check your credit score. Many independent studies have found that nearly 20% of Americans have an error on their credit report. Thankfully, there are many sources to get your credit score and report for free.
Monitoring your credit score and report regularly can save you from hassles and ensure that you don’t have any negative items on your report that could disqualify you from an auto loan.
Bring on a Co-signer
Having a co-signer is a great way to improve your odds of getting approved for an auto loan. When you bring on a co-signer, you are essentially borrowing their credit. Your co-signer will use their credit score to increase your chances of approval. Be sure that your co-signer has good credit and that you have a healthy relationship. However, it’s important to know the risks of having a co-signer, as any late payments or delinquency will affect their credit score as well.
Be sure to sit down and calculate if you are able to afford an auto loan. Usually, experts advise that no more than 20% of your pre-tax income should go towards your total auto expense, including monthly insurance premiums. Be aware that you will be required to leave a down payment of 10% or $1,000 in cash, whichever is less.
Buy Here Pay Here Dealers
Buy here pay here dealers usually have in-house financing, meaning that you will buy your car and get your auto loan at the same time. Typically, these dealers do not check your credit scores but look at your monthly income to see if you can qualify. However, most buy here pay here dealers do not report positive items to the credit bureaus. Ask the dealer if they can report your payments to the 3 credit bureaus to help improve your credit score.
All in all, shopping for a new car with no credit history can be difficult. If you are tired of shopping around for the right auto loan, CrediReady can help. Our nationwide network of trusted dealers and lenders work with buyers in all credit situations. Take a few moments to fill out our free no-obligation today to see how much you can save!