Credit phantoms and car loans

Buying a car can be scary, especially if you’re a credit ghost! Having a thin credit history can mean having a hard time getting approved for a car loan, but there are lenders who can work with unique credit situations that could help raise your credit from the dead.

What is a Credit Ghost?

A credit phantom means that a borrower has a thin file or does not have a great credit history. It could mean that someone has never borrowed before or hasn’t borrowed for a long time. If that’s you, don’t worry – there are lenders out there who work without borrowers.

Having a thin file usually leads to a lower credit score. If you don’t borrow credit, you pay no credit, which can lower your credit score. A thin record can also make auto lenders reluctant to approve you for a car loan because you haven’t proven how well you handle different types of credit, like credit cards or car loans. Your credit score is used to determine your creditworthiness, and if you have a low credit score, it could mean a car loan denial.

Many traditional lenders may be hesitant to approve you because most direct lenders such as banks or credit unions prefer borrowers with good credit ratings. If you’ve been called a credit ghost, your dreams of getting a car loan probably aren’t dashed – you might just have to look for the right lender.

Auto loans without credit

No credit is sometimes a better position than bad credit because a habitual borrower with bad credit may have missed payments, late payments, or repossessions to overcome when applying for new credit. If your biggest hurdle is a below-average credit score, a subprime lender might be your answer for car financing.

Subprime simply means “bad credit,” and the name comes from the category of credit that the credit bureaus refer to as a low credit score range, usually below 660. Subprime lenders are registered with a dealership’s special financial department. , and they have the resources to work with borrowers in all types of individual credit situations.

However, you cannot just apply and be approved. You will need to prove that you have the capacity, the stability and the will to take out a car loan.

Qualify for a subprime auto loan

Meeting the requirements of a subprime lender means having a stable income and employment history, valid ID, down payment, and a few other documents. Auto lenders like stability, and since auto loans last for years at a time, they require their borrowers to show proof that they are, in fact, financially stable. Since you are a credit ghost, a subprime lender needs proof that you have the ability to repay the loan, so they are looking at more than your credit.

Here are some items frequently requested by subprime lenders:

  • Revenue – Must have a minimum monthly income of at least $1,500 to $2,500 before taxes. This is proven by computer generated check stubs which also show year-to-date income.
  • Life stability – Subprime lenders require you to have lived in the same area for approximately one year, proven by a recent utility bill or bank statement in your name with your current address.
  • Identify – Like most major transactions, you have to prove that you are who you say you are! Proof of identity is just a valid driver’s license showing your current address (it cannot be revoked, expired or suspended).
  • Deposit – It proves that you are willing and ready to take out a car loan. To reduce your risk as a borrower without credit, subprime lenders generally require a down payment of at least $1,000 or 10% of the selling price of the vehicle. A stock exchange can also help achieve this goal.
  • Work phone – The lender must be able to contact you, so bring a copy of your recent phone bill in your name. Prepaid cell phones will not do.
  • Personal references – If you are eligible for financing, expect your lender to ask about five to eight personal references with full contact information, such as name, phone number, address, and email address . The only stipulation with these is that a referral cannot live with you.

Now that you know what to expect, you can start gathering your paperwork and start looking for a subprime lender!

Find financing without credit

Not all dealerships have a special financial department, which means not all dealerships are equipped to work with credit ghosts with low or no credit scores. They are more common today, but can be difficult to distinguish from the crowd. While we have you here, why not start your search with Auto Express Credit?

We have a network of dealerships coast to coast who are signed up with bad credit loan options. To be matched with a dealer in your area with the resources you need, simply complete our auto loan application form. There’s never a cost or obligation, so get started now!