Nov 25, 2015 Philip Burgess
For some time now, experts have criticized the ways in which the current credit system effectively locks tens of millions of Americans out of being able to borrow. This can have a major impact on their lives in many ways, not the least of which is that it might make it difficult or even impossible to buy a car with the help of an auto loan. However, sometimes these types of purchases are necessary, especially for low-income workers who need transportation to get to their jobs in the first place.
Usually, when people are considered "credit invisible," it's specifically because they haven't really had much of a chance to borrow in the past. These days, people need a credit history to be able to tap anything from credit cards to auto loans, and lower-income workers tend to have limited, non-existent, or simply troubled pasts when it comes to utilizing traditional credit to the extent that lenders would like to see.
Why is that an issue?
The good news for people who fall into that category but need to buy a car with the help of a loan is that this is one of the easier types of credit to get regardless of borrowing history. The bad news, however, is that those would-be shoppers will typically also be hit with massive interest rates that makes borrowing approach or even surpass unaffordability. It's an unfortunate circumstance that, in many cases, these borrowers might not know what actually constitutes a fair rate for an auto loan in the first place, making them vulnerable to being hit with some that are well above what they should reasonably have to pay.
All those concerns really only apply, though, if the person can get approval for even the most expensive auto loan, which isn't always a guarantee. Unfortunately, many consumers may have credit so bad, or limited, that they can't get a lender to extend them a loan for the car, truck, or SUV they want.
What can be done?
Fortunately for these potential borrowers, there are a number of options available to them that would likely increase their chances of getting approved and keep their rates as affordable as possible. That could include basic things like finding a co-signer with a better credit score, or simply taking additional steps to build credit in the traditional way.
However, it might also be possible for lenders to look at those would-be borrowers' alternative credit scores, such as those from PRBC. These ratings take into account far more than just credit history, also examining things like how regularly these credit-invisible borrowers pay their rent and utilities bills on time and in full. That can help to paint a more complete picture of such a person's finances, and there are benefits to both sides of the transaction. For consumers, it might help them get a better deal on their loans, and for lenders, it could provide them with extra certainty about the person to whom they are lending.