Securing an auto loan or lease can be an effective way to start building a credit history. It may feel like a catch-22—you need credit to get approved for a loan, but need a loan to establish credit. Fortunately, options are available for those with little or no credit history. Here’s a breakdown to help you get started on the path to car ownership or lease and credit building.
If you’ve never held a loan, credit card, or mortgage, you likely have a “thin credit file,” which can make lenders hesitant to approve an auto loan. Checking your credit reports first can help you understand what lenders will see, and you can obtain these free once per week from TransUnion, Experian, and Equifax.
In addition to loans, utility and medical bills might appear on your report, so comb through each one carefully. If there are negative or incorrect entries, you can dispute them, which could improve your credit standing.
If you’re not quite ready to buy a car, consider establishing credit with a revolving credit account, such as a credit card. These accounts help establish your credit age, which makes up 15% of your credit score. When you open a credit card, use it responsibly by keeping your balance below 30% of the credit limit and making payments on time. Avoid overspending on your card, as missed payments can harm your credit score, which would work against your goal of establishing good credit.
Yes, but with some conditions. Most people without an established credit history may not have the cash to buy a car outright, given that the average cost of a new vehicle in late 2024 was close to $49,000. The good news is there are financing options available, even with no credit, including these two major options:
A cosigner with good credit can lend their creditworthiness to help you secure a loan. They take on responsibility for the loan or lease if you’re unable to pay, so both you and your cosigner must be confident in your ability to make timely payments. If you maintain a good payment history, both your credit scores benefit. However, missed payments impact both your credit and your cosigner’s, so be sure to communicate openly with them.
Some dealerships work with subprime lenders who take a more holistic approach to loan approval by considering factors like your income, job stability, and residence history alongside credit information. Subprime loans typically require a down payment—generally 10% of the car’s selling price or $1,000, whichever is less. Not every dealership offers subprime financing, so check ahead of time to ensure you’re working with one that does.
At Grace Quality Used Cars, we’re here to help Massachusetts and New Hampshire residents with a convenient and flexible used car lease program even if you’re new to building credit. We understand that credit history starts somewhere, and our team is committed to working with you to find the best financing options for your needs. Ready to get started ? Contact us to explore our selection and see how we can help you get on the road. With a solid approach, buying a car can be within reach, even without established credit. Visit us today to get started on your journey!
