Buying a vehicle with poor credit is a problem that no one wants to have. However unfortunate circumstances such as prolonged unemployment or underemployment combined with a hefty medical bill may have landed you in debt and left you with an overwhelming amount of bills. With that said, there is hope. Having bad credit should only be looked at as a temporary problem that you can fix! With that in mind, the good news is that securing financing for a car loan is possible even with bad credit. Here is some advice on how those with credit issues can still get a quality a used vehicle.
Improve Your Credit Score
Before you start car shopping check your credit reports and get your score. You should get copies of your credit reports at least 1 month prior to shopping. This allows you to know what’s in the reports to make sure all information is correct. The big three credit bureaus are Equifax, Experian and TransUnion. Each has their own credit report on you, and each is required by federal law to give you a free copy of their reports once a year. Review the reports for errors, and if there are any, have them corrected. Doing so will improve your score. If there are no errors, you can research the interest rates that you will most likely be eligible for determined by your FICO credit score on the report. You can improve your score by a few points each month by simply paying your bills on time. Showing that you are caught up on past due payments and are current will impress any lender.
Determine What Can You Afford
As you work on your credit reports, it’s important to also get a handle on your monthly budget. Knowing what you can reasonably afford for a monthly car payment means living within your means. Do not stretch your income too thin to buy a ‘bigger, better car.’ The bad-credit interest rates will be higher, and will add to the total cost of the auto loan and the monthly payment. Additionally, when it comes to your monthly car payment, you will need to save room in your budget for fuel and insurance costs.
Buy a Used Vehicle
A quality used car is much lower in price than a new one. Shopping for a used vehicle is your best bet until you fully repair your credit. In other words, shop for a practical, reliable used car that will get you back and forth to work. A lower priced used car means lower monthly payments along with the benefit of not having to deal with the immediate depreciation of a new vehicle once it’s driven off the lot.
Make a Down Payment
One sure way of buying a car with bad credit is to save money for a down payment, even if it’s a small amount. A down payment shows lenders that you are committed to the auto loan, you are serious about repairing your credit, and may also improve the chances of getting a better interest rate. Most lenders would like to see a down payment of 10% or $1,000. Cash is always king, but if you have a trade-in in addition to cash that is all the better.
Research & Shop for Good Deals
Just because you are having bad credit problems doesn’t mean you have to be stuck with a bad deal. Do your research and shop around for an auto loan that will meet your needs, i.e., one that you can afford. People with bad credit too often jump at the first loan offer that’s approved no matter how unappealing it may be, especially if they have previously been turned down. If the deal isn’t sitting right with you, don’t take it. Think about this—if one lender has approved your loan, chances are another one will, too! One that is best for you!
Making a fresh start with your credit starts with you. With a little attention, your poor credit score will be a thing of the past! Over a relatively short period, paying your monthly bills on time for a year or two will greatly improve your credit score. Then, if want to buy a newer vehicle or refinance the one you have at a better interest rate, you can do so.
Want to learn more about buying a car with poor credit? If you have had previous repossessions, bankruptcy, divorce foreclosures, slow pays, or your credit score is low, don’t worry, we can work with any credit situation. Contact us today to see how we can help!