It is not easy to get a car loan with no credit score. Despite being aware of your unique circumstance, some lenders may just offer assurance but then run the numbers just the same. That is because they do not do a manual analysis. Instead, they just feed your information to the computer, and they will end up getting rejected.
There are many people such as college students and fresh college grads who do not have a credit score because of the fact that they have never had credit. Others have not also used credit in a long time like the retirees, and these are the reasons why they cannot generate a score. But what you need to know is that as long as you have some money and you really need to get a car, then you definitely can. Here are the important things that you need to know:
1. Be patient, and ask questions
When you start the process, do not preempt that you will not qualify. You should also not assume that you should automatically take financing because you might possibly be able to do better than that. You have to be strategic, and you can start by coming up with a list of potential lenders. And before you even apply, you need to start asking questions to filter your potential lender. You also need to show that you are ready and are good at risk by presenting a record of bills that you are able to pay on time, a healthy down payment, a steady income, and enough disposable income that will enable you to repay your loan.
2. You may still be able to revive your score
If you have already had credit but are just unable to use it in a while, you might still be able to do something about it before you even apply. One of the possible solutions you can take is using your credit card for small purchases which you can just pay off immediately. After six months, you will be able to reach enough credit history that can generate a credit score for you. And just a tip to help you get a good score, use your card for small amounts only as much as possible, then maintain a monthly balance to 20 percent or less of your credit line, and make sure to get the entire balance paid on each month.
3. Keep your future score in mind when you shop
Keep your auto loan applications within the 14-day period as this is the safest thing to do to avoid hurting your credit score. But for those who do not have a score yet, your application will not have any effect at all.
4. You can also shop dealerships
The deals vary depending on the lenders and the brands. What you need to keep in are two things: First, you need to be able to negotiate about the price of the car and next, as soon as you have reached an agreement, you can already ask about financing. Once you are able to lock in the price, you can already mention that you are also interested in any financing deals that they have.
5. You pay more
When you don’t have a credit score, chances are the lenders will be more likely to offer higher interest rates or will demand bigger down payments. The interest rates will depend on your lender as well your own situation. Lenders also normally ask for down payments from those who do not have a credit score, and most of the time, it does not get lower than 20 percent. You should not be scared of these things, but just consider a more basic car.
6. Consider leasing as an option
Potential buyers who do not have a credit score can also consider car leasing as an option. And just like a car loan, a lease is being included in your credit history report which establishes your credit score. What is even nicer about leasing is that you can trade up after two or three years with your car.