Credit Requirements for a New Car Purchase

Common Requirements

No matter where you submit your auto loan application, expect to provide a valid Social Security or Tax Identification number on your credit application. You’ll also need proof of identity, which states your date of birth, such as a passport, driver’s license, or state or military identification. You also must prove your gross annual income and employer information. Determine your income using your most recent paystub and its year-to-date statement. If self-employed, you’ll need to provide proof of claimed income, such as previous tax returns. Some lenders may approve borrowers without credit history, but an established and positive payment history is preferable.

Considerations

Aside from having an income, many lenders prefer at least two years of employment history. You must provide your employer’s information so your lender can confirm your time on the job. Established time at a residence is also preferable; expect to report at least two years of address information, as well. Your income must cover the debts you pay out each month, known as your debt-to-income ratio. Your debts are listed on your credit report and you’ll provide your lender with your housing costs on your credit application. Even if you gross $100,000 annually, you may still be declined for a loan if your credit is maxed out and you have a high debt responsibility.

Good to Excellent Credit

If you want to pursue new car purchase incentives and offers such as low rate financing or leasing, you must have good to excellent credit to obtain an approval. A zero-percent interest rate offer may seem attractive, but not everyone can qualify because of credit standing. If you do not qualify for a lease or low-rate offers, you can still pursue traditional financing. Credit requirements for bank or credit union loans are more lenient than manufacturer requirements, although you can expect a higher interest rate or lose the option to lease.

Approval Requirements

Depending on your credit and the lender you submit your application to, you might be asked to provide additional information or face loan restrictions for your approval. If you have negative items reported on your credit history, your lender may ask you to provide proof that debts are satisfied. Your lender may also require a copy of your Social Security card if your credit report lists alternative Social Security numbers, which is often the result of an error. You may be asked for references, or for the names, addresses and phone numbers of up to five family members or friends.

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