How to Finance a Car if You Have No Credit History

You will need a car in most places in the USA, unless you live in major cities like New York, Atlanta, or Chicago. If you’ve just arrived as a visa holder or permanent resident, then you will most likely need to buy a car.

One big problem is that if you don’t have a credit history, it is difficult to buy a new car. So what do you?

Here are several options. I’ve saved the best one for last!

Look for “Buy Here Pay Here” dealers.

“Buy Here. Pay Here.” or BHPH dealers will sell and finance the car for you. In many cases, they will not even check your credit score because they know that people with bad credit and no credit go to them as a last resort.

The problem, though, is that BHPH dealers charge high costs and high interest rates! They usually have limited selections of cars. You also run the risk of running into a dealer with shady practices.

My suggestion is to skip this option if you can help it!

Finance a car at a high interest rate then refinance later.

The best interest rates are usually reserved for people with great credit scores (700 and above)! If you have lower than 600 or you may even be at under 400, then you will get a high interest rate!

Since you’re a newcomer in the US, you have a new social security number, and you have no record of credit accounts, you usually have no choice!

So if you go to a dealership, swallow your price and take the high interest rate. Expect to pay anywhere from $400 to $700 a month, depending on the car’s make and model, its mileage, and if it’s new or used. My recommendation is to buy a used car to potentially save thousands of dollars, which will help you get established financially in the US.

Pay the car loan regularly on or before the monthly due date. Within a few months, definitely, within a year, you will have established your credit history and increase your credit score. When your score hits 620 or above, you can apply to refinance your auto loan! Check your credit score using CreditKarma.com–it’s a free service!

Buy an inexpensive used car using cash.

If you have around $5,000 that you can spare, buy an inexpensive car with higher mileage. This will be a temporary car for you and will help you build your credit. A 5,000 – dollar car should be able to survive for a year. Then when you have a better credit score, then you can trade it in and get a better car.

To give you some perspective, here’s a few cars around $5,000 at Autotrader.com. The miles on the car may be high, but if you’re going to use it only for a year, it should be good enough. Case in point, I bought my 2007 Ford Escape in 2016 with 135,000 miles! It cost $5,500 and is still running good in 2022. We’ve used it to travel from Nashville TN to Legoland in Florida in 2019 and it didn’t give me a headache until 2022.

If you’re concerned about the condition of the car, always check the Carfax report. You can also go to a mechanic and schedule a pre-purchase inspection.

Look for a co-signer to get a better loan.

If you don’t have $5,000 in cash just lying around, maybe you have a family member or friend who is willing to sign the loan with you. By having a co-signer, you will be able to leverage their credit score so you can finance the car.

If you do this, however, do the right thing and pay the car regularly until it is paid off. Otherwise, you might endanger the credit of your family or friend, as well as yours.

Join a credit union and apply for a car loan.

This is the best option that I’ll recommend. Find a local credit union and apply for a car loan. Credit unions are just like banks, but they’re more like cooperatives. Their depositors are called members and most of the time, they have more localized and personalized service compared to big banks.

When I first arrived in the US, the only way that I got a good loan was through a credit union. The interest was also good enough and way lower than the ones offered by other dealerships and lenders. In fact, other lenders would not even talk to me because my credit was basically non-existent.

Use Google Maps to look for a credit union near you. Then check their eligibility requirements for membership. Some credit unions serve members of the military, teachers, nurses, or residents of a specific city or county.

Check with a dealer if they have a Financing Program for Professionals with NO Credit History.

I recently spoke with a friend who recently arrived in the US. She is a nurse and does not have a credit history yet. They found that used car prices are more expensive than brand new cars! Thankfully, they were able to buy a new car with a dealership that offered financing to professionals who are employed but do not have a credit history. They were given a good interest rate for the car!

Call new car dealerships near you and ask if they have a financing program for foreign professionals with a job and good salary who just arrived in the US. Let them know you’re looking to buy a new car, you have a good job, but you just recently arrived in the US and does not have a credit history yet.

Ready to buy your first car in the US?

If you have any question about the car buying process, just ask them in the comments below and I will answer them to the best of my knowledge.

Better yet, watch the following video to help you in this process.

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