The good news on car loans for first-time buyers is that some of them will have nothing negative on their credit reports.
The bad news is that many have little or nothing at all on their reports.
Car buying can be an uncertain and even daunting process, and trying to obtain a first-time auto loan may contribute to that feeling of uncertainty.
Establishing credit for first-time car buyers*
Consumers with no credit history who are seeking a car loan for the first time may be able to establish credit with some simple steps.
The Consumer Financial Protection Bureau (CFPB), a government agency protecting consumer interests, has some useful, general advice on starting a credit history within its website article “I want to help my daughter start her credit history. What should I do?”
First of all, it recommends getting copies of your credit reports from the major reporting agencies to check for mistakes or signs of identity theft. Reports from Experian, Equifax and TransUnion are available at AnnualCreditReport.com.
If the report looks trouble-free, consider these options:
- Secured credit cards – They normally need a cash security deposit, and a larger deposit results in a higher credit limit. Secured cards may come with fees.
- Authorized card users – It may be possible to be added as an authorized user to the credit card account of someone else, such as a family member. This will only help if that person has good credit, otherwise it may have a negative effect on your own credit profile, points out the CFPB.
- Store cards – These are “typically easier to get than general purpose cards,” says the agency, but may come with high interest rates, and can only be used at one store.
- Cosigner – Another option is cosigning or becoming a joint applicant with a family member on a card. Any late or missed payments will be reported on both of your cards.
Once you’re up and running, then paying your bills on time, keeping well within your credit limit (not more than 30 percent of your total limit), and only applying for the credit you need will help you get and keep a good credit score, says the CFPB article “How do I get and keep a good credit score?”
As credit scores are based on experiences accumulated over time, keeping good habits over a longer period will help.
Getting that first-time buyer car loan
But that may not mean all is lost if you need that first-time car buyer loan to get a vehicle now.
Online lenders such as RoadLoans, which is associated with well-known car-shopping resources such as Autotrader and Cars.com, are in the business of making car loans for qualified first-time buyers as well as others to whom many lenders may be reluctant to loan money.
RoadLoans, for example, has more than 14 years of auto lending experience, helping over two million customers buy new or used vehicles and refinance their current auto loans. It accepts applications from people with good and bad credit, including those with no credit.†
If you are approved for a loan and purchase a vehicle, making timely payments on that auto loan may help to build (or rebuild) your credit going forward, according to the CFPB in “Will an auto loan help me rebuild my credit?” The lender would have to report your payments to one or more of the main credit reporting agencies, mentioned earlier, for this to count, though.
If you need fast-and-easy financing to purchase a used or new car, SUV, crossover or pickup, apply with RoadLoans. It takes just minutes and you’ll get an instant decision.
* These statements are merely informational suggestions only and should not be construed as legal, accounting or professional advice, nor are they intended as a substitute for legal or professional guidance.
RoadLoans is not a credit counseling service and makes no representations about the responsible use of or restoration of consumer credit.
† “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.