Most companies would agree that having no credit is better than bad credit because having no credit just means the person hasn’t had the chance to show how they handle their money. No credit becomes notable with typically younger people who are first-time car buyers or aspiring higher education students attempting to take out a loan. If you are looking for no credit car loans, you have come to the right place for advice.
The process of taking out a car loan can be intimidating and stressful for someone who lacks experience, but can actually be pretty easy with a little bit of research. Even if you think you have no credit, the first thing you should do is check your credit history, because you may be surprised.
What makes up your credit score?
There are a few different aspects that go into calculating a credit score. The biggest factor is payment history. Thirty-five percent of the score is payment history, and it breaks down into account payments, delinquencies, and any public records. Next, making up 30% is the amount owed. This isn’t the total amount of money the person owes, but how much of the available credit is being utilized. Length of credit history makes up 15%, which is broken down to how long ago the first accounts were opened and the frequency of activity with the accounts. There are different types of credit that can be used, and having a combination of accounts in rotation makes up another 10%. The last 10% is new credit. New credit includes inquiries and any recent account openings.
How far back does it go?
It is possible to recover from a bad hit on credit, I promise. I took a huge hit on my credit after refusing to pay for the damages caused by the person I lived with after I had moved out.
My score looked horrible, and I didn’t know what to do. I was lucky to be able to explain the score and be forgiven in many cases, but even if I couldn’t, it is reassuring that it doesn’t stick around forever.
It’s important to keep up with payments, but it’s not uncommon to have a late payment or two. These only last seven years from the delinquency date. Civil judgments also last seven years, but from the filing date. A chapter 7 bankruptcy will last ten years, but a chapter 13 will last, again, seven years. A closed account with no negative history will last ten years, and a positive account that is still open will last as long as it’s open.
Where to check your credit, for free!
Credit Karma is the site I prefer for a few reasons. It is very easy to use and you have access to all credit and debt right there. It will give you a solid estimation of your score depending on the report that they get from TransUnion. There are fewer advertisements than the other credit report sites, which can feel pushy at times.
AnnualCreditReport will give you a copy of credit reports from all three of the major reporting companies in the United States, which are TransUnion, Equifax, and Experian. A credit score can be included for only $8.
IdentityForce has very impressive customer service ratings, but you have to pay if you want to use the service for longer than it’s 30-day free trial. If you decide not to cancel, your options range from $13 to $20 each month.
Identity Guard is another site that gives a 30-day free trial. Using this site will allow access to credit scores and reports from each of the three major companies. It is clearly shown what is making the biggest impact on your credit as well as monitoring of public records. Identity Guard sends alerts for account takeovers, address changes, and credit monitoring.
Credit Sesame, like Credit Karma, gives reports from only TransUnion. Its mobile app is a convenient way to manage and analyze credit, loans, and debt.
Figure out your financials
Taking out a car loan with no credit is a really good way to build your credit. It’s important to be honest when deciding your budget, because you will see these payments reflected in the score. It’s better to be safe than sorry with this one, so risk takers need to settle down.
Be realistic when attempting to finance. Without any credit, you will not be able to purchase $30,000 car for $250 a month unless the plan is to put in several grand as a down payment.
Having a cosigner with good credit is usually necessary for a no credit car loan, and can decrease the payment. However, do not rely on a co-signer. It seems like common sense that the person who takes out the loan should pay it off, but you’d be surprised. It can take a toll on credit as well as the personal relationship between signers.
Expecting reasonable payments will save the buyer and dealer hours of frustration, making the whole process much more simple.
The first bank may not always have the best option when it comes to financing without much credit. Because it’s seen as a risky move on their part, interest rates could be a bit much so it’s important to look into a few different car loan options. Putting forth a bigger deposit and, like I said before, finding a cosigner, can help keep payments manageable.
Many companies even supply auto loan calculators, but those shouldn’t be trusted over talking with a human being. If people aren’t your thing, there are online car loan applications that can be submitted which is, in most cases, much more convenient.
Watch for Scams and Penalties
While there are many understanding people working for banks and loan companies, not all of them are going to be on your side. Money is a powerful entity, and unfortunately is a driving factor for a many people. Those without much credit are often targets.
Sometimes, you and the dealer will try to get the buyer to drive away in one of their vehicles the same day, and they make it happen by not waiting for a loan to be approved. Subject to approval as well as guaranteed approval offerings are phrases to be wary of.
During negotiations, don’t let the dealer focus on the monthly payment. While it is obviously important, it will allow them to add on extra fees for ultimately no reason. It can appear as a small change, but it will add up over the years.
Another big thing to pay attention to is loan modifications. Don’t fall for any calls claiming they will make all of the negotiations for you for an upfront fee. If you tell them that you need to check in with your lender, and they call again, this is the perfect time to mess with them; have some fun with it! They are often times so desperate as to put up with hilarious nonsense, and it’s highly entertaining if you have a small conscious like myself.
If anyone is trying to make you feel bad about having no credit, then it’s important to remember that you want to be in business with someone who wants to help you build your credit up.