Do you want to get an auto loan to buy a car? Is this the first time that you are applying for credit? Or have you not applied for any kind of loan in several years? Chances are that you will not have a credit score. But does zero credit score mean the end of your dream? Can you buy a car with no credit score? Does a zero credit score disqualify you from getting a car loan? We seek answers to all these questions and more.
Usually, first-time car buyers, young college students or recent immigrants will have no credit score. But, what does it mean? Does it mean your score is zero? Can you build your score? Can you still buy a car when you have no credit history? Don’t get overwhelmed. We have all the answers for you.
Buying a Car with No Credit: Let’s End Your Curiosity
Buying a car is an overwhelming experience. When you come to know that you have zero credit score, it becomes all the more daunting. But, understand your situation in detail so that you can make the right choice and make a car purchase.
1. Why is my credit score zero? Or why don’t I have a credit score?
No one has the digit “zero” listed as their credit score. FICO score is the most common formula that credit bureaus (Transunion, Experian, Equifax, etc.) use for calculating your credit worthiness. It has a range of 300 to 850. Now, when you are told that your credit score is zero, it simply means that your credit history is non-existent. You have never applied for any kind of loan or mortgage in your life. The credit bureaus cannot calculate your credit worthiness in terms of FICO scores because you have no history of making payments or missing them.
In rare situations, you may have applied for a loan in the past, but your credit score may still be non-existent. Closed accounts stay on your credit report for 10 years after the last date of the activity. And, negative accounts such as unpaid loans can stay up to seven years. If you have no recent credit activity, you will most likely not have a credit score.
2. Does everyone start out with the same credit score?
Not everyone starts with the same baseline credit score. You cannot have a minimum score of 300 and build it up after a series of credit accounts. It is also not possible to begin with a score of 850.
Usually, it requires six months of credit history to generate a more accurate credit score. When you apply for a credit card or open any other credit account, the credit bureaus will consider your payment history and provide you with a mid-range score. If you have multiple credit accounts with a regular payment history, the number will be higher. The number reduces if there are missed payments on your credit report.
3. Do I have to wait for six months to buy a car?
If you are in the market to buy a car, you can either wait for half a year (and may be more) to build a solid credit score. It will definitely get you easy auto loan approval.
You can also opt-in for UltraFICO scores. By allowing the data analytics company to link your UltraFICO score with your checking, savings and money market accounts, you will be able to increase the ratings. If you have a positive balance in your bank account with consistent cash in hand, your UltraFICO score will be higher than the traditional one.
Another option is to try and link your utility bills to your credit score. Typically, your traditional FICO score will not include your utility bills because they are not credit accounts. So, opt for the newest credit score boosting tool from Experian called Experian Boost. Once you allow the company to access your bank account to identify utility payments, the payments will be added to your credit report and thus, increase your credit score.
4. Are No Credit Auto Loans helpful?
UltraFICO scores and Experian Boost are good tools to increase your credit score. However, not every lender uses them. Both the services are still in their nascent stage. If you want to buy a car and you want to buy it now, you can seek no credit auto financing. It is a loan program specially designed for car buyers who have no credit score.
It is easy to get an auto loan with a zero credit score because lenders believe that a no credit history is always better than a bad credit history. When you do not have a credit score, lenders just don’t know enough about your financial habits. But if your credit score is bad, the lender’s risk increases phenomenally.
Get in touch with an auto financing company that has tons of experience in helping out people with credit issues. Do not get too fixated with the credit score number. Prove yourself as a worthy borrower by providing proof of stable employment and regular income.
So, there you have it! Now you know all there is to no credit history and how to buy a car with a no credit score. Zero credit score doesn’t mean NO auto loans. Go ahead and buy your favorite car today.