No Credit History? No Problem!
Your credit score is one of those things that’s easy to forget about yet it tends to stick with you like gum on your shoe. You don’t think it will affect you until you apply for a car loan or a mortgage and then it bites you on the proverbial behind. It’s easy to seriously damage your credit score. All it takes is a couple of missed bill payments, owing too much on your credit cards, a divorce, or a bankruptcy and your credit score takes a nose dive.
It’s also possible to have no credit history at all. If you’re just out of school and have never had a credit card, never borrowed money from a bank, or have never had to pay your own utilities it’s like you don’t exist when it comes to the agencies that calculate your credit score. When it’s time to borrow money for something like a car, having no credit is almost as bad as having a poor credit score and traditional lenders will be hesitant to extend credit to you.
So, what are you to do if you just graduated from university or just moved out on your own and have a good job but you haven’t established a credit score and you need a car? Fortunately, you have several options, and even if you haven’t established a credit history, you should be able to get a loan. As a bonus, buying a car on credit can be a great way to establish a credit rating, provided of course, you make your payments on time.
Credit Problem Workarounds
Here are some options for getting off the no credit/poor credit merry-go-round:
Option 1: Save your money until you can pay cash for a car. Sometimes you need a vehicle right away and holding off until you can save up money isn’t an option. If there’s no urgent rush, take the bus or ride a bike until you’ve saved up enough money to pay cash for a decent car. Cars are very expensive to operate and maintain, and you might just discover that you can get by quite well without one. Being able to pay cash for a vehicle is great, but if you’re trying to repair damaged credit or establish a credit score, paying cash won’t help. Another option for establishing a credit score is to apply for a department store or gas company credit card, make small purchases with it, and pay it off every month.
Option 2: Borrow money from family or friends and use it to buy a car. This a great way to get a low interest or no interest loan. However, if you fall behind on your payments, it can create a lot of animosity and permanently damage family relationships. Like Option 1, borrowing money from a family member doesn’t do much to help to establish a credit rating which will come in handy down the road when you want to make a large purchase like your first home.
Option 3: Ask someone to co-sign a loan. If you have a parent or trusted relative who is willing to co-sign a loan it will be easier for you to get a loan and your interest rate will be lower. However, if you fail to make regular payments, your co-signer will be liable for the loan, possibly making family get togethers very uncomfortable.
Option 4: Apply for a loan from a company that specializes in sub-prime loans for people who haven’t established their credit rating or have a damaged credit rating. Up to 30% of North Americans have what is considered to be a low credit score. That’s too big of a market for lenders to ignore so many financial institutions are now happy to offer financing to people with low or no credit scores. If you need a sub-prime car loan, shop around for the best possible interest rate. Because of the added risk involved in lending money to people with poor or no credit scores, sub-prime lenders will charge higher interest rates.
Shop Around for the Best Rates
Fortunately, companies like Auto Loan Kelowna specialize in providing car loans to people with less than perfect credit. They also have a large selection of new and used vehicles to choose from, allowing you to get financing and buy a car at the same time. Since they’re part of an established Nissan and Infiniti dealership, you know that you’re dealing with a reputable business.
Getting a Car Loan is Quick and Painless
Getting a loan from one of the many companies that specialize in lending money to people with little or bad credit can be a lot easier and less expensive than you realize. If you meet certain basic requirements, most have a simple three step application process that takes just a few minutes to complete.
A car loan can be an excellent way to establish or rebuild your credit score. If you have no credit or damaged credit and you need a car, visit Auto Loan Kelowna today.