Your First Auto Loan: No Credit History? Try This . . .

An auto loan with no credit is a distinct possibility as lenders can look at a variety of factors in your current financial situation to determine if you qualify for a loan. There are steps you can take to make yourself more attractive to lenders and qualify you for the best interest rate they can offer.

Why is Credit History Important?

Anytime you attempt to borrow money, the first step after the application process is a credit check conducted by the auto dealer or bank from which you hope to get a loan. The three main credit reporting agencies keep track of your borrowing history from such things as credit cards, mortgages, auto loans or consumer loans. Lenders considering working with you want to see if you have been current on other loan payments.

Your credit history generates a credit score for you. This score allows lenders to compare you to all other borrowers and determine whether they want to offer a loan and at what interest rate it might be.

Your Job History Can Help

The first tool, and among the best tools, in getting an auto loan with no credit history is a good job. If you can document a good job history, along with documentation of your pay, most lenders will take this into account.

You can help your case by borrowing in a range supported by your monthly gross income. And remember, many lenders will consider household income, which means if your spouse works, it can boost your chances.

Establishing a Track Record

Do you have a checking and savings account? If not, you need to open both and keep current with them. Any lender will consider assets on hand or your track record in being a good bank customer in weighing your qualifications for an auto loan with no credit.

The same can be said for a credit card. Credit cards are not difficult to get, even if you have no credit history. If you maintain a good record, it begins to establish your credit history. If you have no credit history and take out a credit card be absolutely certain not to abuse it or to fall behind in payments. Those actions will make it harder for you to get an auto loan with no credit.

Relationships Matter

Relationships with your lender or with your family can help you get an auto loan with no credit.

Lenders who know you because you have done business with their bank, or perhaps know you from the community, can take into account that personal knowledge in helping you get a loan. But if you have a friend or a family member willing to co-sign on the loan, and they have a solid credit history, that can also qualify you for a loan, even though you have no credit history.

Beware of "Good" Deals

In loans as in life if a deal is "too good to be true," it probably is. If a lender quickly offers you an auto loan with no credit history be careful that the interest rate actually is competitive and there are not fees or charges which make the loan a bad deal for you.

You can get an auto loan with no credit history, but it is very likely that the interest rate will be higher than market rates. Just make certain that you can afford the loan you qualify for and that it is a good deal for you.

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