Can I Buy a Car If I Don’t Have Any Credit History?

Yes, you absolutely can! In the past, a credit history was usually a requirement for getting an auto loan, but that’s not always the case today. So if you don’t have a credit history, don’t worry—you can still buy a car without paying in full. And we at Indiana Members Credit Union would like to show you some steps you can take to improve your experience as a first-time car buyer.

At IMCU, we value financial education for youth and want to help parents equip their children with the financial knowledge to succeed. And in this article, we’ll show you how to buy your first car with no credit history, including some steps you can take to prepare.

Can I Finance a Car without a Credit Score?

Yes—but you will want to prepare a few things first, to decrease how much you end up paying. First-time car buyers without credit history will want to use a few strategies to their advantage, such as:

  • Saving up money for a down payment
  • Opening up a starter credit card
  • Finding a good co-signer for your loan

Technically, none of these things are “required” to buy a car. But all of them help you get a much better deal. And for each of them, doing something is almost always better than nothing. Let’s look at each strategy individually.

What Is a Good Down Payment on a Car?

First, it’s important to note that any down payment is a good one—no matter how small. A down payment is the amount of money you initially pay on the car when first purchasing it, before you start making car payments. Any money you can pay upfront not only cuts down the amount you owe, but helps decrease your interest rate as well—which ultimately decreases what you pay total.

Many financial experts say saving up 10 to 20 percent of the car’s value is a good down payment. But if saving that amount isn’t possible for you, just save up as much as you can. Overall, the more you can save up now, the better deal you’ll be able to get, and the more money you’ll save in the long run. Additionally, it might be worth considering a cheaper car—or looking for better deals on the same car.

Working With 0 Credit History

Even if you are searching for a car with no credit history as of today, there are things you can do right now to get started. Opening and using a starter credit card gives lenders some sort of proof that you understand how to manage debt, which means they’re more likely to give you a better deal. Credit cards like IMCU’s Jumpstart card are a great low-risk option for establishing a credit history. Even if you only make small purchases with the credit card and pay them back, that still improves your credit score. Some credit history is better than none.

How Much Credit History Is Needed for a Loan?

You don’t need a credit history at all to get a loan. However, if you don’t have a credit history, you will likely be charged higher interest rates. This is why any bit of credit you can build counts—especially as a young person. Use cards like Jumpstart to your advantage. It’s never too late to build credit!

What Credit Score Do You Need To Buy a Car?

Bankrate notes that a credit score of 600 is a good starting point for buying a car, but they also state that there is technically no minimum credit score to buy a car. These minimums will vary lender to lender. But ultimately, having a higher credit score correlates with lenders offering lower interest rates.

What Is a Co-signer?

A co-signer is essentially someone who agrees to pay the loan if the applicant is unable. They are often helpful when making larger purchases, such as a car or a house. If a loan applicant is unable to get approved by themselves, a co-signer can greatly help their chances. Parents often co-sign for their children when buying their first car, but any other adult you trust who is willing can co-sign for your child. If you’re unsure of whether or not you’d make a good co-signer for your child, an auto advisor can help you determine the answer. Advisors can also help you find the best possible lenders and outcomes.

Can I Get Approved for a Car without a Co-Signer?

You can, but if you don’t have a credit history, having a co-signer will help your chances of getting approved. If you or another adult are able to co-sign for your child, that would likely be the best choice.

If you have any questions about purchasing a car, IMCU is here to help. We offer a variety of resources to help children learn about finances alongside their parents, including our SmartStart program that covers the basics of budgeting. We also offer our Jumpstart credit card—the perfect first time credit card. Visit our website to get started today!