I have no credit... Is that going to be a problem??

E

ExplorerXLT95

New member
Well here's the deal ladies and gents... I am in the market for a new car (S4, M3, or SVT Cobra are my very dissimilar choices for the moment, but we'll get to that in another post) and I have no credit. I have never had a credit card, never taken out a loan of any type from a bank, though I do have both a checking and savings (with a VisaCheck Card attached to both accounts) account and have only overdrawn my checking balance by $0.52 once.



Basically, what I am trying to figure out is will this (the fact that I do not have any established credit) be a problem when I seek to buy a new car for the first time(assuming the car at max will cost about $52K)?? If so, what can I do about it?? There's also something strange that I want to ask... Should I be concerned that I don't get credit card offers in the mail often?
 
if your income is sufficient, been working at least 1 yr, and you've claimed yourself an independent for at least one year then you might have some luck....dunno about a $40K loan, though. A $20K loan is more realistic.
 
You might be alright with a big down payment. My 20 year old brother-in-law just tried to buy a used truck for 15,000, and he has no credit. The Ford dealership wanted to give him 18% interest on his loan. Definitely try a third party bank for the loan, unless your credit score is magically high.
 
Depending on your occupation, salary and your job history (how long you have been on the job) there are a couple of options.



First don't just start applying for loans. Every time you apply a credit report request will show up on your credit report. A bunch of request with no open accounts can look very bad to lending officers.



Most of the internet lending companies base their approvals/denials purely on your credit score, which with the information you have provided will not be very high.



Your best bet will be to approach a local bank and/or credit union you have a relationship with (have accounts) and inquire about a loan telling them your current status up front. Additionally, the financial arms of some of the manufacturers also offer special “first time buyer� programs for those with little or no credit.



If you are unable to get a loan from any of these sources I would suggest that you start establishing some credit. See if you can buy something 12 months same as cash program as these programs usually establish some type of consumer credit account that requires you make monthly payments. What ever you do make sure you are not late on any payments.



Purchasing a home is helpful in many ways also. One question on any application for credit is whether you own or rent. Owning scores you points in the grading system (allegedly shows stability). Also, the mortgage starts establishing a track record. There are many mortgage programs for individuals with no credit or “first time buyers� with little or no money down (i.e. FHA programs).



Also using a credit card occasionally will help. Don’t get me wrong I am not suggesting that you go out and charge a lot of stuff, merely that establishing the track record of an ability to pay for things over time can really save you when you are in need. There is a saying in the banking world that is very true…. “Take care of your credit and your credit will take care of you.â€�
 
So basically, I should get myself a credit card for the time being. I really wanted to kind of avoid getting one (helps avoid the compulsive ability to purchase Autopia products at a whim), but oh well.



How do I go about finding out what my credit score is?



How come my father always told me that I don't have to have credit to buy a car? (And no, I can't make all the payment at once, thought that would be very nice)
 
Hate to burst your bubble, but your not going to get a loan on a $52K car unless you have a very well paying job (like well over $50K/year at least) and significant savings with almost no expenses.



With no credit, and young age, you are simply too high of a credit risk to get that kind of loan. Also, take into account insurance costs, you MUST carry full coverage on a car with an outstanding loan and insurance on M3's and S4's isn't cheap. Insurance on a new Cobra isn't going to be a walk in the park either.





There are aways to help, like put a huge amount down on the car (and I mean a ton.), or have a cosigner with lots of credit. Perhaps you should look at a more realistic option for your first purchase. Get a cheaper car, with a small to medium size loan, and that will help you build credit when you decided to purchase a more expensive ride. :up
 
Go to the bank where you have your other accts. and ask them what you can do. You may need a co-signer (parent) but local banks want to establish a good customer base and this is how they do it.
 
i just got a loan from my credit union for my bike, so I'm all in loan mode right now :).



It's almost guaranteed you will need a co-signer (parent) now that I think about it. To get those awesome low APRs, you need a co-signer. Or be 35, married, homeowner, 2.5 kids, and a dog. :D



wait for the nice ride, get a nice garage to put it in first.
 
I'm not going to say anything but you don't know without trying. All of the above responses are correct. But, you must make up your own mind with all of the great advise above. Can you live with a $600 car payment? Go to the calculator and punch in some numbers.
 
Credit Cards are not the end all be all of establishing a good credit score. In fact, too many revolving lines of credit can bring down your credit score. Good credit scores are a combination of a very good payment history with not much outstanding debt in relation to your income. Good payment history on non-revolving lines (such a car loans, student loans, and mortgage) are what really boost up your score. Contrary to what all the spam and TV ads say there is no quick fix to poor or no credit situations, it takes time.



As a former banker I can tell you cars are a risk for banks to lend on. Especially the cars you have mentioned, as these cars are high dollar cars but depreciate rather rapidly. Without very large down payments to offset the initial depreciation hit when you drive the car off the lot, depreciating collateral is not something a bank wants to loan money on to a high risk individual. In Unfortunately, no credit is considered high risk. A co-signer may help, but even that will be more dependent on financial situation and credit score of the co-signer. Now that said, there are exceptions to the rule. For example, banks will lend money to individuals that are entering a career that has a traditional high potential for income and stability, such as a doctor (not the best examples because they usually have student loans out the a$$), so if this is your situation talk to the bank. Even though these individuals may not have any credit or money right now the bank knows there is great potential there and it wants to establish a relationship so it may be willing to take a risk. Smaller locally owned banks and credit unions are more likely to do this type of transaction.



Notwithstanding the above, depending your financial situation, you might want to consider getting a less expensive vehicle so that you can qualify for the loan on your own. Make the payments when you are suppose to for a year or so and establish a good payment history. This will allow you to tap into your credit for the cars you really want.
 
You don't need a credit history to buy a car. Pay cash.



I believe (and most financial planners would agree with me) that the most you should spend on a car is 25% of your income. If you make $50k a year, it is fiscally irresponsible to buy a $50k car.



It sounds like you don't have a house yet (a mortgage would contribute to your credit record). Perhaps you should shoot for that goal first (assuming you make enough $).



A car is the worst investment you will make. It is money that you will never see again. Make sure you can afford to lose that kind of money before you do it.



Dom
 
Getting people car loans is how I make a living.



There are other factors, but here are the big 3:



Credit

Character

Capability



That is what lenders look for.



Honestly, I don't know anything about you other than you say you are looking for a car loan. I would strongly advise you to not share ANY PERSONAL INFORMATION AT ALL, either with me or with anyone else here on autopia, either through posts, emails, or PMs.



Go to http://www.freecreditreport.com to find out your score.



Generally speaking, money down will obviate lack of credit, but also generally speaking no one will lend a first time buyer more than they make in a year. The rule for income to debt varies from source to source, but, again generally, 40% is common; the car payment can be no more than 40% of your net monthly income.



Sometimes Credit Unions can be more generous with their policy if you have payroll deduction; you can't spend what they've already taken! The flip side of that coin, especially for someone in your position, is that payments made by payroll deduction often don't get reported to credit tracking agencies.



Some captive lenders (GMAC, FMC, VWC, etc) offer first time buyer programs that will approve you if you have a recent college degree and proof of employment with enough income to cover the payment plus normal expenses. That would be on NEW CARS of the same make as the finance company; in other words, GMAC won't FTB a new Cobra, nor a used Corvette.



Young, good income, lots of money down, college degree: yes.

Young, good income, lots of money down; maybe.

Young, good income, little money down, college degree: probably.

Young, medium to lower income, good money down: probably not, depends on amount financed (income to debt).

Young, medium to lower income, good money down, cosigner: maybe, depends on aggregate income and cosigner's character.

Young, medium to lower income, little or no down: no way.



(edit) the above scenarios are for someone with no credit history, or very little credit history, ie no comparable high credit.



Of course, YMMV.



Mosca
 
For anyone considering a large financed purchase I highly recommend they obtain credit reports from all three credit reporting agencies:



www.experian.com

www.equifax.com

www.transunion.com



Each of these agencies create a credit score based on proprietary formulas. The most common credit score is known as Beacon aka FICO. This is a model created by Equifax and FICO (Fair, Isaac Corp). Its not only important to know all three credit scores but also find out which agency your future finance company is using to determine credit worthiness.



If you want one-stop shopping for all your credit scores, have a look here: https://qspace.iplace.com/cobrands/434/order1_1.asp?p=2&sc=2256417o



For $40 they'll provide you with a side by side comparo of you current credit status and scores.



Since you have no credit established your credit reports will show almost nothing. Its still important to have them in case you find a discrepancy or flat out wrong info. This can create credit problems without your knowledge so compare the three reports to each other to ensure consistency. File a dispute with any agency that is showing incorrect info.



Obviously you'll want to have worked up a budget which will determine what kind of car payment you can afford. Please note MOSCA's comment about a payment not being greater than 40% of your NET income. Make sure you calculate the numbers correctly.



www.bankrate.com has some excellent payment calculators and loan info. You can even apply for a loan thru them. I'd read all the info they offer in the AUTO section before taking another step.



Good luck and have fun car shopping.
 
Good income = If you are looking at a car for $52K, then you need to make more than $52K per year. You also need to have an income to debt ratio of less than 40%.
 
Yup, that's about the UPPER limit; your income.



But, I don't want to draw any lines here, just offer guidelines. I want EVERYBODY to drive a car!



And, I can't stress enough, let's talk in generalities here. The specifics only matter to you and the people who are providing the money for the transaction. Many others have offered good advice, but the bank's the guy with the cash.



Another word of advice: don't get your credit report too filled up with inquiries, that's bad. When I get a credit report to look at that has 15" of inquiries at the bottom, all it tells me is that the guy's been turned down everywhere already. It's hard for me to put any effort into analyzing it for value, into believing in it. So, try to have your best shot ready right up front.





Mosca
 
If you're afraid of using your cedit card too much, do one of the following:



1) get a card and setup your utilities to automatically charge your CC. Don't use the card for anything else. As long as you pay it off, you will ge tthe benifit fo earning credit, but won't overspend

2) don't carry the CC with you. If you don't have it handy, you'll be less likely to just start spending "free" money

3)Get a gas card or something similar. These are uaully horrible ideas since it becomes another revolving line for people who already have to many CCs, but if you're so scared of not being able to control spending, then get a card where your spending is automaticlly limited. You can't buy more gas then your car can hold so you really won't lose out on it.



If you do get a CC and plan on using it, get a VISA or Mastercard because they are most accpeted. And generally stay away from the cards with an anual fee unless you are really going to use whatever benifit you're paying for. Generally, you don't come out ahead from it.
 
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