Car Financing And Your Credit Score

By | October 14, 2011

Countless Americans have endured recent economic circumstances that have ruined their credit scores, but a poor credit history doesn’t have to keep you from obtaining car financing. You may not get the most ideal car loan on the market, but there are ways in which you can work around the stigma of bad credit.

First and foremost, never consider buying a car you know you cannot afford. This includes ignoring salespeople or finance managers who try to convince you otherwise. Getting strapped with an excessive car payment will only make matters worse, while buying a reasonably priced vehicle will actually help your credit score as you begin to make regular monthly payments.

Bad credit loans are certainly available and tend to come with higher interest rates than they would if you had good credit, but they’re pretty easy to find. Generally, you need to have proof of steady employment and show that you can maintain your current bills along with the monthly car payment, auto insurance and any maintenance costs that arise. You`ll also need a verifiable phone number. It helps if you have lived at your current address for more than a year, although the amount of time is not always necessary. Lenders use address information to determine how stable your employment and financial situation is.

An ideal situation would be if you have been a member of a credit union for a long period of time. While banks tend to dismiss those with bad credit, credit unions will more likely take a chance on a long-standing member. You can qualify for a loan much more easily through a credit union and interest rates are generally better anyway, so it’s a win-win situation.

Qualifying for dealership or bank loans is a bit trickier. Having a creditworthy co-signer will get you the best interest rates and higher loan amounts, but be absolutely certain you can make those payments or your relationship with the co-signer may become strained. No co-signer wants to be hounded with calls or letters citing your payment oversights.

If having a co-signer is not an option, saving money will help. Coming to a dealership or other lender with a decent down payment will increase your chances of being approved for financing. This is because your down payment lowers the balance of the loan, reducing the monthly payments to an amount you can afford and improves the interest rate.

Going to the dealership for financing may prove more fruitful than other means. Dealers want to sell cars and they will work with high-risk customers as much as they can to sell those cars. Some dealers even have their own “bad credit, no credit, no problem” mottos that assure high-risk customers to come on by. You won`t get the best loan deal and your interest rate will probably be high, but you will get financing.

Even people who have filed for bankruptcy can obtain car financing as long as they’ve had the bankruptcy discharged. Obtaining a loan for bad credit is better than not getting one at all, so get out there and see what your options are.

One thought on “Car Financing And Your Credit Score

  1. Hannah Fulton Carsuteldo

    Obviously, if they have several judgments against them or if they have filed for bankruptcy, you may want to refuse to sell them a car.

    Reply

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