How to Buy a New or Used Car with No Credit and No Cosigner
If you’re a first-time car buyer with no credit or cosigner, getting approved for car financing or other types of credit can be a challenge.
Maybe you’re a recent graduate who’s just getting started in your personal and professional life as an adult. Perhaps you have plans to buy a car or home, but you need credit history to get financing. This is why it’s important to understand how credit works. Once you have a good grasp on the basics, you’ll understand ways you can start building your credit history, such as:
Paying on student loans you may have acquired in college.
If you have student loans, making consistent monthly payments on time can help you build a positive credit history.
Applying for a secured credit card.
If you don’t have a lot of credit history established, a secured credit card, which is backed by a cash deposit, can help you build and qualify for other forms of credit. Learn more about secured credit cards.
Paying your bills on time, every time.
Staying on track with paying recurring expenses such as utilities, phone, Internet, cable, insurance, etc., will prevent your accounts from getting turned over to collections and possibly showing up as a mark on your credit report.
Keeping your credit utilization low.
Your credit utilization ratio is how much of your total available credit you use. Most experts recommend using no more than 30 percent of available credit on any card. Since your credit utilization accounts for 30 percent of your FICO credit score, it’s best to keep it low.
But how can you get approved for financing with no credit to begin with?
Great question. If you don’t have any credit history established, finance companies may consider other factors including:
- Employment history: Since most banks and finance companies want to verify that you have a consistent, stable means of covering your monthly car payments, they will check your employment status and history.
- Income: In addition to your employment status, auto lenders and finance companies will want to know how much debt you’d be incurring compared to the amount of income you have. This is called your debt-to-income ratio.
- Down payment: This is the amount of money you put toward the car purchase before the car financing comes into play. Generally, the larger your down payment, the less you need to spend over the life of the loan or financing term.
You can also get a cosigner if you don’t have enough credit history to buy a car.
Typically, people who have little to no credit history rely on the credit of the cosigner to qualify for the car loan or auto financing. Because the co-signer’s name is also on the loan or financing agreement, your payment activity can directly impact his or her credit history. Hence why it’s important for you to make on-time car payments – not just to improve your credit, but to sustain theirs.
But if finding a cosigner isn’t feasible for you, there are still steps you can take to buy a car with no credit, including:
- Setting a car budget.
You can do this by reviewing your current expenses, calculating how much you’d need for a down payment, setting up a car savings fund, and managing your spending. Calculate your car payments. - Doing your research.
You can start by narrowing down which car type is most suitable for your situation based on your usage, style preferences and the number of passengers you expect to accommodate (SUV? Truck? Van? Sedan?). After that, you can move on to determining your car references and whether you plan on purchasing new or used based on your car budget. - Finding a car dealership that can approve every customer.
If you have bad credit or no credit and are shopping for a new or used car, it’s important to find a bank or car dealership that can offer you the right type of car loan or auto financing for your financial situation.
Credit Acceptance is an indirect auto finance company that works with more than 12,000 enrolled car dealerships across the nation to help you get approved for financing on a new or used car, regardless of your credit history. All you need to do is fill out our Start Your Credit Approval form and we’ll get you connected with an enrolled dealer in your local area that can help you get approved for car financing.