First-Time Car Buyers With Zero Credit

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - May 27, 2020

If you're a first-time car buyer and are worried about not having enough credit to qualify for an auto loan, you may be able to set those fears aside, since you may have more credit than you think! A thin credit file doesn't mean zero credit, and it may not stand between you and a car loan if you're working with the right lender.

No Credit Doesn't Equal Zero Credit

As a first-time car buyer with zero credit, you may be surprised to know that your credit score probably isn't zero. Consumers just starting out in the world of credit typically have a credit score in the low-to-middle range of the FICO credit score model, which runs from 300 to 850.

Your credit score is a combination of five factors found on your credit reports, with each making up a percentage of your overall credit score. When you apply for credit, lenders look at both your credit reports and your credit score. They can tell the difference between someone whose credit score is low due to lack of payment history, and someone whose score is low due to missed and late payments.

Working With the Right Lender

When it comes to financing the vehicle you need as a first-time buyer with zero credit, it's important that you work with a lender that knows how to handle credit challenges. Known as subprime lenders, they’re third-party lenders that are signed up with special finance dealerships, although not all dealers work with them.

The reason it's important to apply with a subprime lender is that they take into account factors in addition to your credit score when they're considering you for an auto loan approval. These lenders look into your ability, stability, and willingness to complete a car loan by including a list of qualifications you need to meet in order to be considered for financing.

The specifics vary, but subprime lenders typically require:

  • Proof of identity – A valid driver's license proves this; must be current, not revoked, suspended, or expired.
  • Proof of income – A minimum monthly income of around $1,500 to $2,000 a month before taxes from a single source. Bring in a computer-generated check stub showing year-to-date income to prove it.
  • Proof of residence – You can prove this with a current utility bill or bank statement to your address in your name.
  • Proof of a working phone – A current telephone bill for a landline or contract cell phone in your name.

As a borrower with little credit, you're likely going to be expected to provide a down payment and a list of personal references. Subprime lenders usually require at least $1,000 down, or 10% of a vehicle's selling price, sometimes whichever is less. For personal references, you generally need a list of around five to eight people, complete with names, addresses, email, and phone numbers. References can be family, friends, or coworkers, as long as none of them live with you.

Helpful Hints for First-Time Car Buyers

As a first-time car buyer, there are a few things that you can do to kick-start your ability to get an auto loan.

The first is to know your credit score and what's on your credit reports. When you know exactly what's on your credit reports, you have a baseline to use for building credit, and a car loan is a great way to start. You can get this information for free by visiting www.annualcreditreport.com. Due to the coronavirus pandemic, everybody is allowed to get a free weekly credit report until April 2021 from each of the three national credit bureaus: TransUnion, Experian, and Equifax. After that, it goes back to the typical one report per credit bureau every 12 months.

Another way you can increase your chances of financing a vehicle is by asking a cosigner with good credit to help. A cosigner lends you their good credit score so that you have a better chance to qualify for an auto loan. The cosigner must also qualify for the loan because they agree to make payments if you're unable to.

Finally, you can improve your chances of approval with a larger down payment. A down payment that's over and above the minimum can only help you. By putting more money down, you're borrowing less, which saves you money over the life of your loan because it lowers the interest charges. Plus, a larger amount lowers your monthly payment, sometimes makes you eligible for more favorable loan terms, and usually opens up a wider range of cars to choose from.

Ready to Get Car Shopping?

If you're ready to find your first auto loan, having zero credit doesn't have to come between you and the vehicle you need. If you want a stress and hassle-free way of finding a local dealership that works with the right kind of lender to help with your thin credit situation, you've come to the right place.

Here at CarsDirect, you can get matched to a dealer near you by filling out our fast and secure car loan request form. Don't hesitate any longer, get started right now!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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