How to buy a car if you have no credit history

Buying a new car can be exciting, but it can also be challenging if you need financing. Financial institutions prefer someone with a solid credit history to reduce the risk of default on a car loan. However, you have options even if you don't have an established credit history.

When a lender says you don't have a credit history, it simply means that you don't have credit account records in your name. You may not even have a credit report or score that is used to determine creditworthiness when granting credit to someone. To buy a new car when you don't have a credit history, you need to try one of the following tactics.

Part 1 of 6. Find lenders who don't specialize in loans

Step 1: Find the right lender. Look for lenders that accept applicants with no or limited credit history.

Step 2: Look for loans without credit. Search the Internet for "loans for people without credit" or "auto loans without credit."

Step 3: Check and Compare Terms. Visit the best results websites for terms and conditions such as interest rates and loan terms.

Step 4: Review company reviews. Check with the Better Business Bureau to see if there have been complaints against companies and if they have a rating.

• FunctionsA: Rates for applicants without credit are often higher than for other people, but you can compare conditions to get the best deal possible.

A bank you already do business with through a checking or savings account may be more open to doing business with you if you don't have a previous credit history.

Step 1. Meet the lender in person. Instead of filling out a loan application, make an appointment with the lender. Talking to someone in person can help you make a good impression or understand what you need to do to get approved.

Step 2: Submit your financial statements. Collect the last two pay stubs and bank statements for the last two months for all your accounts.

Step 3. List all past loans.. Have letters of recommendation from everyone you have borrowed money from and from your employer.

Step 4: Present yourself as a good customer. Print a formal letter detailing why you are not at high credit risk and why you will be able to repay your loan.

• Functions: When you treat the task of obtaining an auto loan as a business transaction, you create a positive impression that can help your business, even if you do not have a credit history.

Part 3 of 6. Rely on Cash

Many times, lenders allow compensating factors to override a lack of credit history for loan approval. When you invest more of your own money, it reduces the risk to the lender.

Step 1: Add cash if you can. Increase your down payment by adding cash to your vehicle deal.

Step 2: Minimize your expenses. Choose a less expensive new model so that your down payment is a higher percentage of the total cost.

Step 3: Cash payment. Save up money to pay cash for the car.

• Functions: Put your money in an interest-bearing account while you save up for a vehicle so that its value increases as you add more.

Part 4 of 6: Use a guarantor

Find someone willing to sign a loan with you who already has a loan. The lender will review their credit and ability to repay the loan along with your information.

Step 1. Choose a person you trust. Choose a family member or person you trust completely.

Step 2. Explain your plan in detail. Create a formal plan detailing why you are asking them to sign the loan and how you will be able to pay off the loan. This helps them feel more confident in protecting their own credit.

Step 3: Consider Refinancing Options. Discuss refinancing options after making payments for at least six months or a year to remove their name from the loan.

Step 4. Check credit adequacy. Make sure their credit is adequate and they are earning enough money to cover their loan payments in order to get lender approval.

Part 5 of 6: Ask family members to buy a car

If you can't get funding no matter how hard you try, you may have to ask someone else to buy it and make payments to them. They can either get approved for financing or pay for the car in cash.

Step 1: Choose the right person. Choose someone you know well to contact, preferably a family member or longtime friend.

Step 2: Determine Your Price Range. Keep in mind a specific car or price range.

Step 3: Set up your payment plan. Create a payment plan that details how much you will pay each month at a specific interest rate and for how long.

Step 4: Create and sign an offer. If the person agrees with your proposal, create a document with all the details and ask both of you to sign it.

Part 6 of 6: Set Credit

If you don't need a new car right now, take the time to check your credit history. It usually takes six months to a year to create a credit report if you have at least one credit account.

Step 1: Find the right credit card. Research online to find credit cards with no credit or bad credit.

Step 2: Consider Using a Secure Credit Card. This allows you to deposit and get approved for an equal credit limit. In order to restore your credit profile, you need to get a line of credit.

• There are several credit card companies that offer secured cards without any credit checks, but they usually come with a higher annual fee or other caveats.

Step 3: Activate your credit card. Make a small purchase and pay off the balance to activate your credit card.

Step 4: Keep making payments on time.

• FunctionsA: Make sure you know that the credit provider reports to credit agencies, otherwise the account will not help you establish a credit history.

Not all of these options will work for your situation, but they all allow you to buy a new car even if you don't have a verified credit history. Just make sure you plan ahead and know that you can afford the car you're buying so you don't have bad credit, which can be as bad or worse than no credit.