How to Buy a Car With No Credit History

If you’ve never signed up for a credit card or taken out a loan but want to finance a vehicle, the process can be a bit tricky. Buying a car with no credit history is possible; you’ll just have to take a different approach compared to someone with credit. 

In most cases, you’ll need a cosigner with a strong credit history. Alternatively, you can put your vehicle shopping journey on pause until you build a credit profile of your own. Fortunately, there are several ways to go about it. Here’s how to buy a car with no credit history. 

How to buy a car with no credit history

If you don’t have a credit history or score, you may still be able to finance a vehicle. You have several options. 

Get a cosigner

The best approach for financing a vehicle when you don’t have a credit score is to get a cosigner. When choosing a cosigner, consider the following:

• The person’s credit score
• Their credit history (length of accounts, payment history, etc.)
• The nature of your relationship and the amount of trust between you 

Cosigning an auto loan is a huge commitment. The person who cosigns for you is essentially saying they will be responsible for paying for the vehicle if you default. 

Make sure the person who cosigns your auto loan is someone you trust and someone who trusts you. Follow through on your payments, and don’t take on more than you can afford. 

Apply with a credit union or community bank

A local credit union or community bank may have more flexible terms, especially if you already have an account with them. While the institution may not approve you on your own with no credit history, it’s important to explore all of your options. 

The credit union or bank could also break down what you need to do to become a stronger applicant. Use these insights to build a credit profile and become eligible for an auto loan. For example, the institution may approve you for a low-limit credit card. Using the card responsibly and making payments on time will build your score over time. 

Make a larger down payment

Down payments are not always required for vehicle loans. However, you may only get approved for a small loan amount. If you want a vehicle outside of your approval range, you will need to cover the difference with a cash down payment.

Making a larger down payment is something the lender views as a positive. It shows you have saved money and are committed to making a vehicle purchase. Paying more down on a vehicle also reduces the amount you need to finance, which means less money spent on interest over the life of the loan. 

Look into buy here, pay here dealerships

If you don’t have a cosigner, have no credit, and need a vehicle right away, buy here, pay here dealerships may be your only option. However, you should use them as a last resort.

Buy here, pay here dealers care more about your income and ability to repay the loan than your credit. Some of them don’t even check your credit. Unfortunately, there are several downsides to buy here, pay here, including:

• Shorter loan terms
• Much higher interest rates
• Weekly or bi-weekly payments

Additionally, most buy here, pay here dealerships don’t report payments to the credit bureaus, which means you won’t get credit for your on-time payments. 

Can you get an auto loan with no credit history?

Technically, yes, you may be able to get an auto loan with no credit history. However, you’ll almost certainly need a cosigner to get approved for any useful loan amount. In some cases, you may be able to finance a cheaper vehicle on your own, but the vehicle will likely be older and have higher mileage. 

If you absolutely want to finance the vehicle on your own but have time, focus on building a credit history first. 

Making on-time rent and utility payments can help you build a credit history, provided they are reported to the credit bureaus. Platforms like Kikoff allow you to report verified rent and utility payments to the credit bureaus. Use Kikoff to build credit responsibly before heading to the car lot. 

How no credit is different from bad credit

When learning how to buy a car with no credit history, it’s important to consider the differences between no credit and poor credit. Borrowers with a spotty credit history but a score that is above the lender’s minimum requirements may have an easier time financing a vehicle. 

If you have no credit, it means you’ve never had reported activity with the credit bureaus, or there is not enough reported history to calculate a score. These consumers don’t have any borrowing information for lenders to base their decision on. 

A person with bad credit has had some negative activity reported to the credit bureaus and has a lower score than lenders want. 

Whether you have low credit or no credit, you will likely need a cosigner to get an auto loan. 

How to start building credit before buying a car

There are several ways to build your credit profile before shopping for a vehicle. You can:

• Get a low-limit credit card
• Report on-time rent and utility payments
• Finance a small purchase and pay it off
• Take out a small loan
• Make all of your payments on time
• Avoid stretching yourself too thin
• Don’t authorize too many hard credit checks

There are no shortcuts to building your credit score. Don’t open multiple credit card accounts, use a high percentage of available credit, or take on too many bills. If you stretch yourself too thin, it may be hard to keep up with payments. Instead, focus on consistent, positive financial behavior over time. 

Conclusion

Kikoff is a digital platform designed to help you build your credit. By using Kikoff, you can add positive payment history to your credit profile and give the bureaus more data to calculate a score. Kikoff offerings include:

• A paid credit service subscription
• Rent reporting
• An invite-only credit builder loan
• Free dispute tools
• Free debt negotiation
• Bill negotiation

Start building a positive credit history with Kikoff.