We at Miami Auto Approval Center accept all types of credit, including, of course, no credit. No credit and bad credit are not exactly the same, unlike what many consumers think. The former means you haven’t purchased anything yet that requires credit so you don’t have a credit score and history yet. The latter means you have established credit already but it’s marred with negative information, giving you a low credit score.
In this guide, we give you some tips on how to apply for a car loan when you are yet to establish credit. There are challenges ahead, but everything will be fine as long as you keep the following reminders and information in mind.
A lot of lenders these days can accept auto loan applications from people with no credit. However, the terms of the deal will be better and the approval easier if you show lenders credit history even if there’s nothing much in it yet. Lenders look at your credit history to evaluate your creditworthiness.
You can get secured credit cards to start your credit history and prove your credit behavior. But you need to open a bank account first before applying for credit cards. Your bank account won’t affect your credit rating but a well-established one can make your credit card application easier.
Since you don’t have a credit history yet for lenders to assess your creditworthiness, they need to look at a few documents to complete their assessment. This is where your proofs of employment, income and residence come in. Lenders need to see stability in these aspects.
Tenure of less than a year in your current company may not be enough for many lenders to declare your employment status stable. You need to be employed in the same company for at least two years. It is not advisable to resign or make any drastic move involving your job before applying for a car loan.
The same goes with your income. For some lenders, three months’ worth of pay stubs is enough. Other lenders may require more.
And lastly, moving out in brief intervals might raise a red flag to lenders. That’s why you need to be as steady as possible in terms of your residence if you’re planning on taking out an auto loan.
Proof You Can Pay
Lenders take on a risk when they grant auto loans to people with no credit. This risk has something to do with your payment behavior. Without a credit history, lenders won’t be able to tell whether you’re a good payer or not. This is one reason why it is often challenging to get approved for auto financing when you are credit-less.
Nevertheless, lenders can look past your no-credit status and be convinced about your capability to pay when you put bigger money down. A bigger down payment implies that you are serious about getting an auto loan and paying it off on time. So, consider shelling out a larger amount for the down payment for easier application process.
Someone’s Good Credit
Consider convincing someone to be your cosigner when applying for an auto loan with no credit. A cosigner with good credit can speed up the application process and even guarantee approval. That’s because your business becomes less risky for lenders when they see that someone with good credit is willing to be your guarantor. However, make sure you’ll make the monthly payments on time so that your credit and your cosigner’s won’t be damaged.