Can You Get a Car Loan With No Credit?

Quick Answer

Getting a car loan without any credit can be challenging unless you have a cosigner or you seek out no-credit auto loans, which typically carry high interest rates and fees.

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It's possible to get approved for a car loan with no credit, but unless you have a cosigner to help you, your options may be limited and expensive. Here's what you should know about how your credit comes into play when applying for a car loan and your options if you have no credit history.

What Credit Score Do You Need for a Car Loan?

Auto lenders use a variation of the traditional FICO® Score called the FICO Auto Score when evaluating applicants. This version considers all of the same factors as the base version but puts additional emphasis on how you've managed auto loan debt in the past.

The good news is that auto loans are available to consumers across the credit spectrum, which means that you don't necessarily need a minimum credit score to qualify for one. Each lender has its own criteria, however, so if your credit score is relatively low or you have no credit history at all, your options may be limited.

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 also 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 skin in the game.

Apply for a No-Credit Auto Loan

Some lenders and 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.

Keep in mind, though, that no-credit auto loans can be expensive. By the time you pay off the debt, you may end up paying more in interest charges than the vehicle's value when you bought it.

As a result, it's best to avoid this option unless you have no other alternatives and you can't live without a car.

Consider Establishing Credit Before Getting a Car Loan

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.

You can start by getting a secured credit card or a credit-builder loan, which can help you establish a positive payment history. You can also 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.

Additionally, you can register with Experian Boost®ø, which allows you to add certain on-time utility, phone and subscription payments to your Experian credit file and can provide an immediate score boost.

If you're not certain how to get started or you want some additional guidance, consider signing up for Experian Go™, which can provide you with resources to start your credit journey and help you every step of the way.

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.

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