As a first-time car buyer with no credit or bad credit,* you might feel up against it.
Consumers with long and strong credit histories generally stand a better chance of getting financing from an auto lender, and may enjoy better terms and a greater choice of vehicles.
But now that we’ve aired some of the common realities of auto loan shopping as a first-time buyer, take heart.
When you’re in one of these situations, there are a number of steps that may be taken to make the whole process easier.
7 Tips for first-time car buyers with limited or bad credit histories
- Look for inaccuracies and errors in your credit reports that might affect access to credit. Even if you think you have no credit history, it’s worth checking what may be there. You can request a free copy of your credit report every 12 months at AnnualCreditReport.com.
- Budget, with tools like budget and auto loan calculators, to estimate what you can afford to pay for a car, and how different financing terms affect what you may pay.
- A down payment will reduce what you need to borrow and may also reduce what you pay in finance charges over the course of the loan. It could be a requirement from some lenders.
- Adding a co-applicant or cosigner to your application may boost your chances of approval and, if approved, improve your loan terms.
- Can you get a car loan with no credit, and no cosigner or co-applicant? Depending on your particular circumstances and the lender, it may be possible to get approved, but applying for a joint loan or with a cosigner will typically better your chances.
- Think about applying with different auto lenders. If approved, compare the terms offered. You may want to apply for a preapproved auto loan with a lender like RoadLoans, that enables its customers to know the terms of their loan before visiting the dealership.
- Another option is to establish credit before seeking a car loan. The Consumer Financial Protection Bureau recommends steps such as getting a store card or secured credit card, or being added as an authorized user on a credit card, in order to start a credit history. And habits like making payments on time, not getting too close to your credit limit (keep within 30 percent on your total credit limit), and only applying for credit you need will help get and keep a good score, it advises.
How to apply and shop for a car
Buying a car for the first time with no credit history or poor credit is not ideal but, with preparation, you may save yourself some valuable time and money.
Consider applying for financing with RoadLoans, the direct-lending platform of Santander Consumer USA, which takes just a few minutes and provides an instant loan decision.
All credit types can apply and, if approved, you’ll receive multiple offers customized to your needs.
Select the option that fits best and visit the preferred dealer included in your loan documents. Alternatively, you can use our dealer locator to select another auto dealership within our national network, and shop for a high quality vehicle.
Apply for a car loan with RoadLoans.
* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press), Bankrate.com, Credit.com, Investopedia, NerdWallet.com and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by RoadLoans.com and Santander Consumer USA.