How To Get a Car Loan With No Credit History

Vector image of blue car with hands holding a checklist on a clipboard.


You can secure a car loan with no credit history. But before you take the wheel of your next vehicle, you need to take control of your finances. By saving for a down payment, monitoring your credit reports and building a healthy credit history, you can be better prepared to drive off the lot in the car you need.

In this article:

Check your credit reports
Financing a car with no credit history
Start building credit
Get in the financial driver’s seat

Buying a car is one of the biggest purchases you’ll make, so it’s important to get it right. If you’re financing, it’s a debt that can impact you financially for years. Having no or little credit history can be a hinderance to securing a loan for a car, but it’s not impossible. Below are some things to keep in consider if you’re trying to get a car loan with little or no credit history:

Check your credit reports

Even if you don’t think you have a credit history, a potential lender will check your reports, so you should too. If you’ve borrowed money before, you may in fact have a credit history. Credit cards, student loans, or even being an authorized user on a family member’s credit card account may have started your credit history. Certain adverse accounts, like collections, can also contribute to a credit report.

Even if you know you’ve never taken out a loan and don’t have a credit history, checking your credit reports can be useful to spot potential fraud. If someone was able to obtain some of your valuable personal information, they could use it to open credit accounts in your name. These accounts would appear on your credit report. You can check your credit report from each of the three nationwide credit reporting agencies each week at If you try to check your TransUnion credit report online but you do not have a credit report, you will receive a message that says TransUnion is unable to complete the request. Even if you have no credit report with TransUnion, you should still check to see if you have reports with Equifax and Experian. Checking your credit reports won’t hurt your credit score. Lenders don’t always report to all three credit reporting agencies, so credit reports can have different information.   

If you do have a credit report, read through it to ensure there is no suspicious activity. You can dispute items on your credit report that are inaccurate. Clearing up potential inaccuracies well ahead of car shopping is helpful. Dispute investigations can take up to 30 days, so you’ll need time to submit and wait for results. Checking your report and disputing inaccurate items if needed will help you be better prepared as you shop for a car. It can also offer peace of mind that your report is an accurate reflection of your credit history.

Financing a car with no credit history

Your approach to car shopping may be different if you have no credit history, preparation is still key to getting the best deal possible.

Get a cosigner

One way to help you secure a loan is to get someone to cosign the loan with you. To help your odds of approval, you may  want to use a cosigner with healthy credit. But also, a cosigner should be someone who trusts you and knows you’re financially responsible. This is because a cosigner will be responsible for paying back the loan should you be unable to. Being a cosigner is a serious financial responsibility. Their financial health could be impacted should you not plan appropriately. This is why it’s imperative to prepare your credit and finances as well as possible before you start shopping for a car that meets your needs.

Talk to your bank or credit union

If you have an established relationship with a bank or credit union, ask them about loans that may work for your situation. Your bank or credit union may have a better understanding of your financial history than a car dealership or an outside lender, and they may be willing to work with you on securing a loan. With limited or no credit history, the interest rate applied to the loan may be on the higher end of the scale. There is no guarantee your bank or credit union will offer a loan or a loan with the best rate, but it’s a smart place to start. Even if they approve you for a loan, you’ll still want to shop around.

Shop for an auto loan online

There are loans available for people with no or thin credit histories. Searching online can giveyou access to more lenders than there may be in your community. You can shop around for loans just like you would shop around for a car.

Just know that they may request access to your credit report to offer a loan preapproval, which could result in a hard inquiry on your credit report. Hard inquiries can have a temporary, negative impact on your credit score. Bunching loan applications into a short time can limit the number of hard inquiries that appear on your credit report. You may want to pay attention to the loans that have the best terms and interest rates, which can ultimately save you money.

Talk to the dealership’s finance department

Dealerships will work hard to get you into a car. Depending on the dealership you’re working with, they may be able to secure you a loan even if you have no credit history. You may be required to bring extra documentation like proof of residency, proof of income, and even personal references to help get approved. What is required along with your loan application depends on the dealership. Make sure to contact the dealership ahead of time so you know what to bring. Shopping for a loan ahead of time is important because you don’t have to accept what the dealership offers — it may not be the most favorable option.

Save for a down payment

Typically, the larger the down payment, the easier it is to secure a loan. The more you pay upfront, the less risk there is for the lender. Saving can be tough, but the longer you can put off buying a new vehicle, the more you can save.

If you’re able to save enough, you can consider buying a less expensive used vehicle outright. A used vehicle with high mileage may not be as flashy, but it can save you money in loan fees and interest. Do your research to see if there are reliable used cars in your area that fit your budget. It’s a good idea to contact a local mechanic to look over a used car before you purchase it. They’ll likely charge you a fee, but their expert eyes can catch costly troubles you may have missed, so it can actually be a money saver.

Everyone is in a different place financially and, as stated before, saving can be difficult. Finding the car that best fits your needs at a price you can afford is what’s most important. Do your best to save for your down payment as you prepare to buy your car. Every incremental dollar will help you save in the long run.

Start building credit

While you’re saving up to buy your car, it’s a good time to start building a credit history if you don’t have one.  There are different tools you can use to get started.

Secured credit card

One option to get you started building credit is a secured credit card. Like other credit cards, secured credit card issuers may report your account details, including your payment history, to credit reporting agencies.

Having a record of consistent on-time payments can help you build healthy credit. Creditors tend to provide updates to credit reporting agencies once a month, but it can take several months for you to build a history with enough information to generate a credit score. Not all lenders report account information to all credit reporting agencies. Talk to your lender about account reporting if you have any questions.

With a secured card, you make an initial deposit, which becomes your credit limit. You can spend up to that credit limit at any given time, though you can’t use your deposit money to pay down the credit card balance. As your credit history grows, your credit issuer may allow you to “graduate” to a regular credit card, or you may have the opportunity to apply for other credit cards or loans as needed. If you close your secured card account in good standing, you will get your initial deposit back. Closing an account could have a negative impact on your credit score because the length of your credit history is a credit score factor. However, with continued good credit habits, your score will improve.

Consider a credit builder loan

A credit builder loan can help you build a credit history, but it does come at a cost. It’s not like a typical loan with which you would receive the money directly and then make regular payments until the loan is paid off. If you have a credit builder loan, the lender sends your money into an account to hold until the end of the term of the loan. You would make regular payments and when the loan term is over, the original, principal balance is released to you. The regular payments you make include interest charges, which is the cost of using the loan. However, the lender will report your account and payments to credit reporting agencies, which can help you grow your credit history.

Credit score factors

Knowing common credit score factors can help you make productive decisions as you build your credit. There are different credit scoring models, and the factors they use to calculate credit scores tend to overlap.

Common credit score factors include:

  • Payment history
  • Age and credit mix
  • Utilization
  • Balances
  • New credit
  • Available credit

Making payments on time and keeping your credit utilization rate low can help you build a credit history. Achieving a good credit score takes time, but if you practice sound financial and credit habits, you can get there.

Get in the financial driver’s seat

When you begin car shopping, start gathering the necessary paperwork and supporting documents you may need for your loan applications. This can include proof of income and financial statements. It’s also a good time to do a financial checkup. Build a budget that works for your current situation. Set attainable financial goals, knowing that buying a reliable, inexpensive car can certainly be one. And check your credit reports. This will help not only with your car purchase, but with other major life events that may come after.

As you continue to build your credit, continue to check your credit reports regularly. In addition to checking your credit reports for free weekly, you can also consider TransUnion’s paid credit monitoring service, for personalized feedback on important credit score factors and alerts when there are notable changes on your credit report.       

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

The credit scores provided are based on the VantageScore® 3.0 model. Lenders use a variety of credit scores and are likely to use a credit score different from VantageScore® 3.0 to assess your creditworthiness.

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