If you are a newcomer and just getting started in the country, you may have no credit history. This can be a problem if you need to finance a vehicle purchase. You could, of course, buy a car with cash, but this would do nothing to establish your credit.
On the other hand, if you can get approved for a no credit auto loan, you will have an opportunity to start building a good credit history.
Auto Loan Approval with No Credit History
It can be frustrating to be a newcomer with no credit history. You don't have bad credit, after all. You simply haven't been given a chance to prove that you are a responsible borrower. With no credit history on file in this country, lenders have no way of knowing that you're not a borrowing risk. This is why you might be denied by banks and credit unions when you apply for financing.
Luckily, there are special finance lenders that are able to work with newcomers who have little or no credit history. However, there are other requirements to consider, so it is best to be prepared before applying for a no credit car loan.
In order to qualify with a special finance lender, you will probably need the following:
- A valid driver's licence
- Recent paycheque stubs to verify income
- A utility bill to verify residence
- Documentation of any other income
Having a large down payment will increase your chances to be approved for an auto loan. This is because putting cash towards your car purchase up front will mean that you have to borrow less. And taking out a smaller loan means you're less of a loan risk.
Having a co-signer with a good, established credit history can also be very helpful. This person needs to agree to assume payments on the loan if you default. Being a co-signer is a big commitment, so only a close friend or family member should be asked to do this.
Other Ways to Build a Good Credit History as a Newcomer
Again, buying a car with a no credit auto loan is a good way to start building credit, but there are other things that you'll need to do in order to establish a strong credit history. An auto loan is a type of installment credit. You will also need revolving credit in your file, while paying all of your bills on time is important in earning and maintaining a good credit score.
Credit card accounts are revolving credit lines because they don't have a set payoff date. Getting approved for a credit card with no credit history can be difficult. However, there are certain cards that are easier to get.
- Secured Credit Cards: To open one of these lines of credit, you are required to deposit cash into an account. The amount, usually between $300 and $1,000, becomes your spending limit. A secured card is used just like a "regular" credit card to make purchases at stores and online. If you use the card regularly and pay your bills responsibly, your credit rating will gradually increase.
- RBC's Newcomer Card: Canada's largest bank, RBC, offers a special, unsecured credit card to qualifying newcomers. This card comes with a $1,000 spending limit and requires no credit history. In their Welcome to Canada Package, RBC also offers a banking account with no monthly fees for six months. Check their website for details, terms and conditions.
Building a good credit history requires time, effort and patience, but the rewards are many. Once you have a strong credit score, financing large purchases will be much easier. You will also save money when you are able to qualify for better interest rates.
No Credit Car Loans for Newcomers
If you are ready to start building your credit history by purchasing the car you need with a no credit auto loan, Canada Auto Loan can help. In order to find special finance lenders, you will need to work with a dealership that is signed up with them.
We can quickly and easily match you with the right dealership from the start. Also, because we have a countrywide network of qualified dealers, you won't have to travel far. Wherever you are, from Vancouver to Halifax, we probably have a dealership near you.
Our service is free, and you won't be obligated to buy anything when you apply with us. So, go ahead and fill out our simple and secure online application to get started today.