When it comes to applying for a car loan, young shoppers and those without a significant credit history are at a disadvantage. Under the FICO system, having no credit history or a very short one is almost as bad as having a poor history. This results in many first-time car buyers having to settle for a subprime car loan - if they can get approved at all.
That's where Neo comes in. The company was recently awarded the grand prize at the eighth-annual Founder Showcase, a competition for startup companies. Neo wowed the judges with a business plan that focuses on first- and second-time car buyers who need financing, reports TechCrunch. Rather than simply sticking these buyers with a high-interest loan, Neo looks at other data, such as social demographics, employment history and financial records, to determine how likely a buyer is to pay back a loan.
In some cases, this has resulted in buyers who don't have the traditional credit history qualifying for loans with as low as 6 percent interest - mainly because they can demonstrate that they have the funds available to pay back the loan.
Learning about credit is important for first-time buyers, as it can affect the initial purchase significantly. First-time buyers also need to learn about auto maintenance, as this may have even more of an affect over the life of the vehicle. Keeping up with oil changes and other routing maintenance can ensure that buyers keep their first car for a long time.