If you have never acquired a credit card or obtained credit in your name, getting a loan for a new or used car can be tricky. When applying for credit, lenders assess your ability to repay the loan. To do this, they will review your consumer credit report. If you have no credit history, lenders may request that you obtain a co-signer, or deny your application. Here are a few tips to help you secure auto loan financing with no credit.
Apply for a Secured or Unsecured Credit Card
Before applying for a new or used auto loan, attempt to obtain a credit card, department store card, etc. Credit is important; however, getting your first credit card is not always easy. Similar to auto loan lenders, most credit card companies prefer applicants to have previous credit accounts.
To solve this problem, consider applying for a secured credit card. Before applying for the card, contact the company and inquire if the account will appear on your credit report as secured. Choose credit card companies that do not reveal that the account is secured. To creditors reviewing your report, it will appear as if you have opened and maintained an unsecured account. This will boost their confidence in your ability to handle credit responsibly.
Once you have obtained a secured or unsecured credit card, carefully monitor your spending. Having too much debt also has a negative effect on your credit. If you keep account balances at the maximum limit, instead of increasing credit score, you will be damaging your score.
Open a Checking or Savings Account
Even without a credit card or credit history, some lenders consider having a verifiable checking or savings account as a plus. Because having a bank account will boost your credibility, you may be able to obtain an auto loan if you have an account in good standing. Good standing means no bounced checks, overdraft fees, etc.
Apply for Auto Loan with a Co-debtor
If you are under 18-years-old, you will need a co-signer to obtain an auto loan. However, if you have zero credit history, having a co-signer is an effective method for acquiring credit in your name. Co-debtors may include any person with a good credit rating such as parents, spouse, siblings, etc. Individuals who agree to serve as a co-debtor should do so with care. If the primary debtor fails to repay the loan, you become accountable for the debt. |
