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Is it Possible to Secure An Auto Loan with a Bad Credit History?
Why This Article?
In today’s economy, it seems that most of the country’s population is struggling to get by. Mortgage payments, student loans and credit card debt are piling up, while jobs and pensions are dwindling. Even one missed payment can hurt your credit score and make it harder for you to qualify for necessary funds like car loans and mortgages.
What Is A Bad Credit Score?
Credit scores (also known as a FICO score) range from 300 to 850, with 850 being pretty much perfect. You’ll be happy to know that very few people (less than 1%) of the population actually have this score. A rating of 300, however, indicates that you have likely declared bankruptcy in the past or you have a very poor history of making payments on time. Anything lower than 650 means that you are probably going to be paying higher interest rates for things like car loans and credit cards.
What does this Mean When I’m Buying a Car?
So you’ve check several car reviews sites and you want to get out and buy the car of your dreams. You have some money saved up, but you’ll need to borrow the rest. You go to the bank, only to be told that you don’t qualify for car loans because of your credit. You go home, feeling utterly defeated and depressed. This scenario doesn’t have to happen, however. You can arm yourself with information that will have the bank saying yes to your request.
Gather Your Defenses
Get a copy of your credit history and credit score from all of the credit bureaus. First, make sure that everything is correct; if not, contact the vendors and credit bureau and let them know of the error. If everything is correct and your report lists several late payments, be prepared to explain to the bank why they were late. Perhaps you were laid off at the time, or you were going through some personal issues. Banks are more willing to work with you if they know there was a reason for your tardiness, rather than just an, “I didn’t feel like paying,” attitude.
Buying a car can be stressful, and even when you’ve been through every car reviews site online, it can still be a challenge to know what is right for you and your family to ride around in. Qualifying for car loans shouldn’t add to the stress. One important fact should be noted here: securing the loan doesn’t mean that you will necessarily be paying the lowest interest rate. If you have been flagged as a higher risk, the bank or financial institution may instill a higher rate. Once you have proven yourself by paying on time and, you can negotiate a lower rate.
If you’re buying a car that is used, the finance company will want to know what the blue book value is, to make sure they are not loaning you more than the car is worth. You will know the value by having visited car reviews sites, and arming yourself with as much information as possible.