I should say, will I be able to get a loan at a decent interest rate?
I had a credit card in my early 20’s but cancelled it. For the past 15 years or so, I managed to not do anything on credit. Last year, I pulled my credit reports and they were blank.
I got a credit card that i’ve now had a year in order to build some credit history. Just a $1000 limit. I charged a few things, kept a balance a few months making payments and then paid it off. I pulled my report again and the credit card is now there with good payment history. Is that gonna be enough to qualify me for a car loan with a non extortionary interest rate and not too many hassles? Other factors: stable work history, many years at current job, decent if unspectacular salary.
Not looking to buy a new BMW or anything. Looking for a car in the $12-15,000 range. Putting $2000 down, so will need to finance between $10-$13000. I’d consider a new car. A civic or something if I could qualify for one of those 0% loans they advertise.
I am not an expert, but if you have a stable work history and a decent income you will probably have no problem getting financing. You won’t get the best rate and probably will be financed through the manufacturers credit arm. But you shouldn’t have too much of a problem.
Sign up for www.creditkarma.com (everyone should, it isn’t a scam). It will pull your credit info for free, tell you what types of things you can qualify for, give you your approximate credit score, and show you how to improve it over time.
It will tell your approximate FICO score and Vanguard score and show you how that relates to the general population to give you an idea of what you can get. Plenty of people buy cars with less than great credit. The problem is that the rate might be very high so you may be better off waiting a little while if you can make yours better quickly.
One option would be to set up an account with a local credit union. Credit unions will generally take on slightly more risky loans if you can show a good employment history.
No, you probably will not qualify for the best rate, only people that don’t need great credit can get great credit. (not too serious here) I qualified for 0% from Hyundai, the best my son (36 yo) could do was 2.3%.
What a great question! I too am buying a car next year, and have a similar situation. I had bad credit when I was younger, paid it all off, and then let it all clear off my report, and then for years I had NO credit. I got a credit card a year ago through my credit union; and have a standing account with them, and plan to get the loan through them next year.
I also have been a little concerned. Like the OP, I plan to buy a car between $12K and $15K. Unlike the OP, I hope to put down close to $10K right away - I’ve been squirreling away my nuts for years. (I’m going to put $6K from myself, my other half is going to dip into his savings for an additional $2K, and I’m going to ask my dad for $2K.)
I’ve also been a little concerned about financing and interest, so I’m glad you started this thread. Hope to see some more answers.
Yeah, but i’d probably have to bank with them for a while before getting a loan, right? I’m gonna need something in the next month or so. My current car is 14 years old and on it’s last leg without some very expensive repairs, and I have a 40 minute commute to work. I can’t do the wing and a prayer thing for another year.
Right now my credit union is offering 3.75% on new and used (but I think no more than 2-3 years old) cars. That’s OK but not as good as the 0-2% financing deals you might get on a new car. I’d take a look at the Edmunds incentives page and see if there are any car models you like with financing incentives right now. If there are, I really don’t see a downside to going in and seeing if you qualify.
Yes, that would help over time but it won’t help very quickly. A big part of your credit score is how old your oldest account is so don’t cancel your oldest one. Another factor is the average age of your accounts so adding another will drag that down. Still, you should have several types of cards (3 or 4) so you will be better off in the future.
It’s likely that you will need a co-signer to get a car loan. I was a finance manager at a dealership for years and only once was I able to get a person with no previous auto loan history financed without a co-signer. He had a score in the 800s and a very large amount down.
Lenders want to see a signer on the loan that has at least 15 months of good payments on an auto, in addition to the other credit parameters they have established. The only thing you can really do is apply at a dealership and see where you stand. Remember, they don’t make any money if they can’t sell you a car, so the finance manager isn’t against you if they give you the condition of a co-signer. He/she is going to do whatever they can to help make a sale.
In my experience, I’ll tell you to be prepared if they tell you that. In the absence of a spousal co-buyer, a parent is next best, then sibling. Unrelated persons are generally frowned upon.
Maybe it depends where you go? I didn’t need a co-signer for my first auto loan (I bought a 3-year-old Ford sedan from Carmax, in pristine condition). And my credit then was in pretty bad shape. I put down what I could afford–1k on a 10,5k car–and ended up with a practically usurious interest rate (20%). I know, I know… but, I needed a car within 36 hours (my old one died) or I was going to lose my job. So I didn’t have a whole lot of choice. But my point is, if I didn’t need a co-signer, I don’t think the OP would.
I’ve thought about refinancing since my credit’s in better shape now. But I don’t fancy spreading my payments over an even longer time period. I’ll be paying on this loan for another 25 months as it is.
You can re-finance to a shorter period. Probably with larger payments, but you can afford that now. And most lenders are happy to deal with someone responsible enough to do this.
You said your credit was in bad shape, which means you had some history. The OP has zero credit history aside from a year of payments on a credit card. Bad credit is easier to get financed than no credit. Different dealerships also work with different lenders. The dealership I was at didn’t work with any lenders who would finance a first time buyer without a co-signer (except for the one extenuating circumstance). There may be some finance companies out there who are doing it, but I’m just not familiar with who they are.
Your initial statement was that lenders want to see someone who has previously financed an auto. I had never done that before. The cars I had before my current one were purchased for cash (or in one case, a gift from a parent). I did have a few years of [bad] credit under my belt (late payments on student loans and a couple credit cards that I couldn’t afford to pay), and I ended up filing bankruptcy about 6 months after getting the car loan.
That all went down a few years back, and I’ve been current on everything post-BK. But I definitely didn’t have a previous auto loan, and still didn’t need a co-signer.
Seems odd. There must be lots of people out there who dont have someone who will co-sign a loan. You’re agreeing to take on the burden or else have your own credit ruined if the person needing the loan flakes out or gets into trouble. I can’t even imagine asking someone to co-sign a loan. And i’m a responsible person. Asking someone to do that seems like overstepping a boundary. At least in my world. I sure wouldn’t co sign for someone. Even a close relative. I love you and all, i’ll come pick you up if stranded but I aint linking my financial history with anyone except a spouse.
I bolded and embiggened the part that makes the lender want to have a co-buyer on the car. I hope you won’t need one. Yes there are lots of people out there who don’t have someone who will co-sign with them. I lost a whole lot of deals because I couldn’t get a lender to do it. There are lenders out there who will, but my dealership didn’t have a relationship with any of them.
Most dealers have 10-20 lenders who they have dealer agreements with. There are hundreds of finance companies. Our margins weren’t high enough to absorb the fees involved with companies who did Special Finance. I didn’t say there was no way, no how you would be able to do it, just to be prepared to hear the word co-signer. Before you spend any time at a dealership and falling in love with a car, call around and ask if they can get you done without one. (Hopefully you can get a straight answer from the finance manager.)
Thirding the credit union idea. I bought my first new car with a credit union loan - my credit history was fine, but I had a crappy debt to income ratio (lots of unexpected medical expenses not covered by insurance, while working a fairly low-paying job just a few months after grad school and all its attendant loans). When I explained why I needed a new car (it’s hard to drive a stick shift with one functional leg! and the old car died anyway), they were willing to work with me as long as I put 10% down. And I joined the credit union for the express purpose of getting the car loan.