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Bad credit? No credit? Here are tips for finding an affordable car with fair financing.

Overcoming the 3 Myths of No Credit

We detail the three no-credit myths and how to overcome them.

Trying to get a loan when you have no credit history is the Catch-22 of borrowing.

It's like trying to get your first job... when it seems that every job requires experience. How can you get work experience without getting a job?

In the same way, lenders want to see your track record with credit before giving you a loan or a credit card. But how do you build a credit history when no one has given you credit yet?

Here's the good news: While financing a car without a credit history can be a challenge, peoiple do it every day. What you can't do is let yourself get bogged down by the three no-credit myths. They are just that: myths.

Myth No. 1: Everybody Has Credit but Me

Every journey begins at the beginning. In building a credit history, everyone starts out at the same spot - with a totally blank credit record.

Understand that you're not alone; it isn't just young adults who are trying to finance their first car, get a loan or apply for a credit card. There are a lot of perfectly normal  reasons why someone might need to borrow money for the first time.

  • A divorce may mean suddenly needing to borrow money in your own name rather than your spouse's.
  • Although ths is increasingly rare, some people only use cash and so they have no record with credit.
  • Even if someone has been used to paying with a card - or through apps like Venmo or Zelle - these don't help establish a credit history. They simply link with an account, but you're not using credit to borrow money. 

Myth No. 2: No Credit Means Bad Credit

In the simplest terms, no credit just means that you don't have a credit history. Your credit isn't good or bad; it just doesn't exist. You simply haven't borrowed money for a purchase yet.

Making regular, on-time payments on a loan or credit card is the best way to build a solid credit history. Consistently making on-time payments on a car loan, for example, grows your credit history over time and shows lenders that you how to handle credit.

Myth No. 3: There Are No Options

Here's the secret about lenders: They make money lending you money, so they want to extend credit to as many borrowers as possible.So if you have a job with a reliable, regular income, a lender will take a chance on you - even if you have a blank credit report.

Do you have a big purchase in your future, such as a car, and you have 6 months or a year to build some credit history? look for companies that will issue a card to new borrowers. Unfortunately, in the past, there were a lot more options. People had a credit card for the gas station and might have others for different department stores. These places were more flexible in issuing cards to first-time borrowers. But once you find credit, the golden rule is the same. When you receive a card, use it wisely and make the payments on time.

If you suddenly find yourself needing to finance a car, many car lots have a first-time-buyer program for people with limited credit or no credit history at all. These programs are often supported by the lenders that are associated directly with an automaker, such as Ford Motor Credit. Dealers will work to find vehicles that are best suited to your financial and automotive needs regardless of your credit experience. In addition to offering competitive interest rates and payment plans, programs like these can serve as the first step to establishing a solid credit history.

What it means to you: There are plenty of lenders (even when you're buying a car) that will give credit to first-time borrowers; it's just a matter of finding them.

John Beck

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