When there is no sufficient information in a person’s credit report in order to generate a credit score on them, than they are designated as consumers with a thin file by credit reporting agencies.
Consumers who haven’t taken out a single car loan, mortgage, student loan, or a credit card, can’t obtain a credit score from a credit bureau, so they have to seek other means for establishing credit in order to get a loan in the future.
Nowadays Not as Complicated as it Used to Be
In the past, consumers with thin-file credits used to have a tough time getting an auto loan. But, that has started to change lately. Credit reporting agencies have started to use new methods for assigning credit scores to consumers with thin-file credits, meaning that they don’t have sufficient credit history.
Nowadays, credit bureaus often use alternative data to determine an individual’s creditworthiness, besides traditional data, which includes payment history for credit cards and home or car loans, as well as student loans.
Many credit reporting companies now tend to assign credit scores to thin-file consumers by relying on data such as car rentals, home rentals and income.
Always Pay Your Bills on Time
Consumers without enough credit history can qualify for a credit score by making sure they pay their electricity, insurance, phone and other bills on time, which are some of the factors taken into account by some credit scoring companies.
When trying to get a car loan with no credit history, consumers must do their best to prove their creditworthiness. That’s why they should bring as many relevant documents as possible when applying for a loan at a bank or credit union. Those documents include a copy of their bank statement, proof of timely payments on recurring bills, along with proof of employment history.
The above-mentioned documents are important for lenders, because they are proof that a consumer is able to make recurring payments on time.
The bottom line is that getting an auto loan if you have no credit history can be tricky, but it is possible. The most important thing is to gather the required documentation that proves a consumer will be able to pay off the loan on time.