Auto Financing with Little or No Credit History

Auto financing with little or no credit history doesn't have to mean that you can't get a car loan. It means, however,  that you will need to do a little extra work. Here are a few things to consider before you search for that auto loan.

Maintain Steady Employment

Lenders analyze your length of employment and use it as one of the parameters for auto loans. If you have a job, keep it. Having a steady job shows responsibility. You will be required to document a six month employment history.  It's important to remember lenders will verify your employment records and complete a thorough employment verification.

Open A Bank Account


To establish that you receive steady income and keep balances, open both checking and savings accounts at a bank or credit union. Have your paystub automatically deposited into your account and make sure you don't have any overdrafts.

Keep Your Same Residence


Try to remain in the same residence, whether that's an apartment you share with others, live at home, or on your own. It is beneficial to show that you are responsible and can show a steady living history.  In fact, if you are paying rent, a landlord can also serve as a credit line item.  Lenders look at consistent residency as another factor in deciding whether to grant you a loan.

Establish Credit

You need an excellent credit history to obtain the best auto financing rates. When you have no, or very little credit history, you should begin to establish and build a credit profile. A common suggestion is to get a credit card, such as a gasoline or department store card, and pay it off each month.  Keep the charges low and pay on time, every time. Up to 35 percent of your credit score is determined by on time payments and no late or missed payments.

Put A Utility Bill In Your Name


If you rent or even stay at your parents' home, get a utility bill in your name. This could be an extra phone line, or a cell phone. Pay each bill on time each month.  Utility ratings can also serve as credit line items for your overall credit picture and can assist you further establish credit.

Wait 6 Months

Building up credit takes time, so allow 6 months of building credit before applying for auto financing. You can find lenders out there who will offer and promise car financing with no credit, but you'll pay much higher rates. If at all possible, stick it out and establish your credit history first.

Use A Car Loan Broker

If you don't have the time to wait, do as much as you can to establish credit and also check with a reputable car loan broker. They have access to many lenders and can get you the best rates for auto financing in your current situation. A broker has more options than one lender and it can be beneficial to have them search for the best deal for you.

Once your credit history and credit score are better, you can trade-up your vehicle.  Credit is the key, so don't forget to pay on time, every time.


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