How To Buy A Car With No Credit Or Bad Credit

What The Loan Companies Are Looking For

Your credit history is a summary of all transactions you’ve made in the past that have involved anyone lending you money or billing you for services. This can include credit cards, utility bills, student loans, and much more.

There are three major credit bureaus who compile these lists and based on your history, you are given a number that represents your credit worthiness. You ideally want this number to be 680 or higher. If you make late payments, go into default on loans, or don’t pay your bills at all, your credit rating will go down – sometimes dramatically.

These companies send reports to each of the three major credit reporting companies on transactions that they have undertaken with their customers. The credit reporting companies then put together the information onto your credit report.

You are entitled to receive one free credit report per year thanks to federal legislation that went into effect a few years ago. All you need to do is go to www.freecreditreport.com and request a copy. Once you get your credit report, it’s very important that you go over it with a fine tooth comb to make sure the information is accurate. You are entitled to make corrections if any of the data is wrong. Just contact the credit reporting agency and provide documentation that shows the wrong entry is incorrect and they are required to correct it.

When you go to apply for a car loan, the finance company will be looking for a few specific things on your application. First and foremost, they want to see documented monthly income. To get the lowest interest rate, it will need to be $1,600 or more.

They want people with established living and working situations. This means being at your present address for six months or more and being with same employer for six months or more.

They ideally would like for you to have a year of established credit with no black marks during that time frame. That means no late payments, no excessive credit card applications, and no previous loan defaults.

To get the lowest interest rates possible, your credit score should be 680 or higher. With a credit score of 600 to 680, you’ll pay a higher rate like 10 to 15 percent. If your credit score is below 600, it's very difficult to get approval, and below 550 it is nearly impossible – at least through traditional means.

For some people, paying a higher interest rate, this can be extremely detrimental to their monthly expenses. Not only will your car payments be higher each month, the interest you will pay is almost 6 times that of a loan with a lower interest rate.

With that information in mind, you can see how urgent it is for you to establish healthy credit, and maintain a healthy credit score, or you will spend your whole life wasting your meager earnings on interest, when it should be building your nest egg. This is why most people, even those ready to retire are broke. A lifetime of careless spending habits, paying only the minimum monthly payment, and paying full price for everything has left them with no nest egg.

So, if you don’t have any credit at all, this is a great time to start establishing a credit history that you can be proud of. 

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