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 land that first job that demands job experience as a qualification. How are you supposed to gain work experience without getting a job? Lenders want to see your credit track record before giving you a loan or a credit card. How do you build a history when no one wants to extend credit to someone without any credit history?

Trying to finance a car without a credit history can be challenging, but it's done 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 starting line. 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's not just young adults attempting to finance their first car, get a student loan or get a major credit card. There are several perfectly normal situations in which people find themselves trying 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. Believe it or not, there are actually people out there who, after years of operating strictly on a cash basis, find themselves needing to borrow money for a house or some other big-ticket item. There are lots of legitimate reasons for not having a credit record.

Myth No. 2: No Credit Means Bad Credit

In the simplest terms, no credit 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 primary path to building a solid credit history. Consistently making on-time payments on a car loan, for example, grows your credit history over time, and assures lenders you know how to manage credit.

Myth No. 3: There Are No Options

Here's the secret about lenders: They make money lending us money, so it's in their best interest to extend credit to as many borrowers as possible. Because of this, if you are employed, you'll find a lender to take a chance on you despite having a blank credit report.

If you know 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. Oil companies, such as Shell and Exxon Mobil, are more flexible in issuing cards to first-time borrowers. Likewise, department stores, such as Sears, J.C. Penney and so on, are more likely to issue a credit card to an untested borrower than, say, Visa. When you receive a card, use it wisely and make the payments on time.

If you suddenly find yourself needing to finance a car, look for a dealer advertising 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.

Russ Heaps