Can You Get a Car Loan With No Credit?

What Credit Score Do You Need for a Car Loan?

There's no universal minimum credit score requirement to get approved for an auto loan. In fact, some lenders specialize in working with borrowers with low credit scores and even no credit history at all.

That said, each lender has its own criteria for determining your eligibility for a loan and what your terms will look like. If you're applying on your own, for instance, you can expect a high interest rate and other costs.

If you want better approval odds and the chance to secure a low interest rate, a good credit score for an auto loan would fall in the good to exceptional credit range, which means a score of 670 or higher. The higher your score, the better your chances of securing favorable terms.

How to Get a Car Loan With No Credit

Getting approved for any type of credit when you have no credit history can be challenging, but there are options available to you, even when it comes to auto loans.

Get a Cosigner

If you have a family member or friend with a great credit history who is willing to cosign your loan application, that can help you get approved with a lower rate. This is because the cosigner is agreeing to cover loan payments if you can't, reducing the risk to the lender.

That said, it's important that your cosigner understands their responsibilities and that they know the loan will show up on their credit report just as it will yours. And it's crucial that you make on-time payments to avoid putting that responsibility on your cosigner and potentially damaging your relationship.

Make a Large Down Payment

The more money you put down on a vehicle purchase, the less you have to finance, which reduces the risk to the lender. While a big down payment may not be enough to convince every lender, some may be willing to work with you knowing that you're willing to have more skin in the game.

Reach Out to Your Bank or Credit Union

If you have a longstanding account with a smaller bank or credit union, you may be able to leverage your relationship with the financial institution to qualify for a loan. Just keep in mind that this option may not be as viable as it used to be.

If possible, it can help to get preapproved with multiple lenders, so you can compare your offers.

Learn more: The Best Way to Finance a Car

Avoid Buy Here, Pay Here Financing

Some dealers offer auto loans that you don't need a credit history to obtain. They may look at your finances as a whole to determine your fiscal responsibility, or they may simply look at your income and other debts to ensure that you can afford your monthly payments. Because the dealer offers the loan in-house, it's typically called buy here, pay here financing.

Keep in mind, though, that these no-credit auto loans can be expensive. Additionally, the dealer may not report your payments to the credit bureaus unless they're late, so your efforts won't help you establish a positive credit history. As a result, it's best to avoid this option unless you have no other alternatives and you can't live without a car.

How to Build Credit Before You Buy a Car

While it can be tough to wait, it can be in your best interest to work on building your credit history before you take out an auto loan. Here are some steps you can take to accomplish your goal:

• Sign up for Experian Go^™. With Experian Go, you can establish an Experian credit file, allowing you to track your progress as you build your credit score from scratch. You'll also get insights about how credit works, making it easier to develop good credit habits.
• Apply for credit. Consider applying for a secured credit card or a credit-builder loan, which can help you establish a positive payment history. Alternatively, you can ask a family member who has good credit to add you as an authorized user on their credit card. Once you're added to the account, the entire account history will be added to your credit reports.
• Pay bills on time. Your debt payment history is the most important factor in your credit score, so it's crucial that you always pay your bills on time. If you fall behind on a payment, prioritize getting caught up as quickly as possible to stop further damage to your score.
• Keep credit card balances low. Your credit utilization rate—the percentage of available credit on credit cards at a given time—is an important factor in your FICO^® Score^☉. As you start using a credit card, it's important to keep your utilization rate (in other words, your balance) as low as possible.
• Register for Experian Boost^®ø. With Experian Boost, you can add certain on-time cellphone, utility, rent, insurance and subscription payments to your Experian credit file, which could help you build credit and boost your credit scores.

Consider Other Options in the Meantime

Buying a car can be difficult if your credit history isn't good enough to obtain an auto loan. While there are some options you can consider, they may not be available or beneficial for your situation.

If you need a vehicle to get to work or school and can't wait until you've established a credit history, you may consider public transportation or an inexpensive car that you can afford to buy outright.

While these options may not be ideal, they can meet your needs temporarily while you get into a better position to qualify for a car loan.