If i don’t have credit, do i have bad credit?
If you are a new borrower or have a limited credit history, your credit score may not seem very good at first glance. However, if a lender delves into your actual credit reports, they may tell a different story, and there are lenders who can help borrowers who have no credit.
What is considered bad credit?
The good news is that a borrower without credit is not necessarily considered a “bad” credit borrower. No one starts their journey with a perfect credit score of 850 – it’s usually in the lower-to-middle range of the spectrum when you’re starting out.
The FICO credit scoring model assigns credit scores between 300 and 850, so as a borrower with no credit you are likely to land somewhere in the middle. Many lenders may view a borrower with no credit history more favorably than a borrower with a similar credit score and a lot of negative scores on their credit reports.
Traditionally, a true bad credit borrower can be someone with multiple missed or late payments, bankruptcy, one or more vehicle repossessions, accounts in collection, or defaults with past creditors. For a lender, the lack of a credit history can still be viewed as risky, but it will likely be better received than a borrower with multiple negative ratings that have resulted in a downgrade in their credit rating.
However, any borrower with a credit score of less than 660 may have a hard time getting loan approvals.
As a new borrower, a lender can be cautious when considering approving a loan for you. Without a long-standing credit history, you haven’t yet proven your ability to pay off different credit accounts on time or manage a full credit base. However, if you apply for new credit from lenders who consider more than your credit score, you can prove your creditworthiness in other, more tangible ways.
Start your credit history
Many new borrowers start their credit history with a credit card or car loan, often with the help of a co-signer. A co-signer is someone who lends you good credit to help you meet credit score requirements, and who reduces the risk of loan default by being an alternate payer. Having a co-signer can be a great way for a new borrower to get wet and get their first loan approval.
However, not all borrowers have a co-signer to go with them, and if that’s you, a subprime auto loan could be a good way to start acquiring a payment history and build your credit score.
Subprime lenders are auto lenders registered with special financial concessions. They often have first-time buyers programs, help borrowers with unique credit situations, and even work with borrowers who have gone bankrupt. They do this by looking at external factors alongside your credit reports, such as income, life stability, and work history.
Traditional auto lenders, such as banks or credit unions, may see a low credit score and deny you auto financing. Often times, a credit score that does not meet the requirements is sufficient reason for denial. But by applying for new credit from lenders who are equipped to work with poor credit, you can increase your chances of getting approved if you meet the other criteria.
No auto loan borrower on credit
If you’re ready for a car loan and a way to start filling out your credit reports, we’ve got some tips to help you prepare for subprime financing.
Subprime lenders generally require:
- A consistent work history without interruptions of more than 30 days between jobs
- Minimum monthly income of around $ 1,500 to $ 2,500 (before taxes)
- A recent utility bill in your name proving your home address
- A recent phone bill proving that you have a working cell phone or landline
- A list of five to eight personal references
- A valid driver’s license
- A deposit of at least $ 1,000 or 10% of the vehicle’s selling price
Depending on the lender you work with and your individual situation, you may need more or less items to prove your ability to pay off a car loan – but the ones listed above tend to be the basic documentation required. .
Find an auto lender without credit
Finding an auto lender who can help you take off your credit history isn’t always easy, but we want to help make your car buying experience easier, here at Express auto loan.
Instead of wasting time and energy looking for a special financing dealer, let us handle the search by connecting you to a dealer in your area who can help bad credit borrowers. Get started now by filling out our free auto loan application form.