Can I Get a Car Loan Without a Credit History?
It seems like a kind of Butterscotch Man problem. The Butterscotch Man, you see, can’t run until he gets warm and can’t get warm until he runs. Similarly with credit, you can’t get a loan without good credit, but you can’t get good credit without taking out a loan.
The problem with having no credit history is that you are a big question mark to the credit industry. They have no place to start in establishing the loan amount to grant, the interest rate to charge, or the number of installments or loan length. Loaners are also a skittish lot (one could hardly blame them!), and they’re prone to worry why someone with no loan history wants a loan now? Is it because you never needed one before, or because you knew you’d never get approved before?
So, what can be done to solve this issue? There are many actions that you can take in order to work your way out of the problem. What you need to do is start building a healthy credit history for yourself. There are many financial products that you can acquire in order to get the financial institutions to start reporting to the credit agencies and thus to start building a good credit history. In fact, is it possible to fix bad credit.
Payday loans do not require credit checks, since they use your paycheck for collateral. You’ll be able to apply for a payday loan without having to worry about the lack of a credit history. The only catch with a payday loan is that the interest rate charged for this kind of products is very high, so at best you should make one quick symbolic loan and pay it off immediately. Also, the kind of outfit which does a payday loan doesn’t carry much weight with a credit-reporting agency.
A better way is to establish a good bank account record. If you don’t have one already, open a savings or checking account with a bank. This will contribute to your credit history, building you a good reputation as you go, since any transaction made with this account will be recorded and reported to the credit agencies.
Then it’s time to think about those credit card offers you get in the mail. Even small children have gotten credit card offers mailed to them, so with no credit at all, you can start establishing good credit using a card. Check out offers until you find one you like. When you get one, use it for small daily purchases that you would otherwise pay cash for and pay your balance in full each month - the interest will be negligible this way. This will start a record going with your credit history, too, and is a significant way to raise your credit score.
Keep to this strategy for several months, and you’re starting to smell like a rose. You’ve jammed out one payday loan, and kept a checking, savings, and revolving credit account (which is what a credit card is) going for months, without stiffing anybody. Now that you’ve been keeping this up, you’ll practically have lenders following you home.
You can try taking out a large loan at the same bank you started your accounts at. If you can’t get approved there, try applying with other lenders. There are car loan lenders who operate online and deal with clients who have credit issues as well. There are even car loans specially designed for those with bad credit, no credit or even a bankruptcy on their record.
It also might be a good idea to get recommendation letters from your employer and from any creditor whom you’ve dealt with that doesn’t report to credit agencies, stating that you are a good payer. Good luck and happy borrowing, you savvy consumer, you! Here’s one we found to be OK, and they indicate that bad credit is not a problem; it’s called OpenCheck.