How to Get a Car Loan with No Credit

Tip #1: Get a Co-Signer

If you have no existing credit, you may want to consider getting someone to co-sign on a loan. This should be someone you trust, like a good friend or family member, and they should have a good credit history. Not only can this greatly help you get approved for a loan, but it may help you qualify for a lower interest rate, too.

Keep in mind, though, that if you’re late or miss any payments, it’ll affect the co-signer’s credit history. That’s why you’ll want to be diligent with making every payment on time.

Tip #2: Look into Alternative Credit Data

If you can’t find someone to be a co-signer, try looking into any alternative credit data that you may have.

If you don’t have a mortgage or credit card, see if you have one or more of the following:

• Checking account
• Rent payments
• Cell phone or utility bills

Some companies will use these items to see how well you make timely payments on a regular basis. To find out if an auto lender uses this alternative credit scoring model, be sure to ask. You can also have a financer at your dealership offer their assistance with this.

Tip #3: Make a Down Payment

Making an initial down payment is a highly beneficial part of the financing process—it’s recommended to do, whether you have credit or not.

You’ll want to make a down payment of no less than 20% of the car’s total cost if it’s new and 10% if it’s used. This will mean you’re borrowing less, which could decrease the cost of the loan. This will also help prevent you from being “upside down” on your loan, which is when you owe more than what the vehicle is worth.

Check out our payment calculator to estimate what your monthly payments could be.

Bonus Tip: Build Your Credit

This last tip is for people who can put off buying a car. If you’d like, you can take the time to build a credit history, which could make it a little easier to get the interest rate you want on a loan.

Getting a credit card alone will help build your credit. Just be sure to make payments on it on time, keep the balance as low as possible, and don’t open too many accounts at once. Otherwise, these could have a negative impact on the credit score you’re trying to raise.