Buying a Car with Bad Credit

So your credit isn’t great and you need a new car. Most people think it’s impossible, but it’s not. However there are some simple tips to keep in mind when buying a new car, especially when you have little or no credit.

First you need to understand the process that takes place when you purchase a car. When you apply for a loan, whether it is at the dealership, through your local bank or on the web, usually your application will be submitted to several finance companies. The finance companies will then review your application and your credit report and decide whether or not they want to finance your vehicle. They will then respond and if they approve you they will approve with a certain APR, which is your interest.

Before you start it is important know your credit. Know what your credit report reflects about you and what it will tell the finance companies when they review it. You can typically get your credit card on the Internet for a fairly reasonable amount of money. This will let you know what you are getting into ahead of time. This will also show you what the car dealers are seeing about you when you go to buy a car. Your credit report is the single most important thing when it comes to purchasing a new car. Your FICO score is also important. Your FICO score is a score between 300-800 that determines how high of a credit risk you are. The higher the number the better you are. Anything above 650 is okay but if you get any lower then your credit probably isn’t looking too good.

If you have someone with good credit, especially a homeowner, see if they will co-sign on a loan. This will allow for a much better chance of getting approved for a loan and a guaranteed lower interest rate. Homeowners are considered low-risk in loans and therefore stand a better chance of a lower interest.

There are many places that have guaranteed loans for people with bad credit. These companies are sometimes a little risky as you may end up with an extremely high interest rate. Unfortunately if you have poor credit you may have no choice but to have a high interest rate.

Scan the Internet and read about different companies who offer loans for people with bad credit. It is usually pretty simple to distinguish the bad from the good. Also, talk to your dealership and be honest with them. Explain to them that you have poor credit and see if they have any ideas.

Credit unions are usually a good place to start if your credit isn’t great. They are usually more lenient on who they will finance. If you or a family member is a member of a credit union already it will be your best bet.

If you go to a dealership and they tell you that they cannot finance you, try other places. If your poor credit comes from 2-4 years ago but the past two years are good, try your local bank. Remember that negative items stay on your credit report for seven years. It is never impossible to get financing.

In the event that you get a high interest rate on your car loan, remember that if you make all your payments on time that it is usually pretty simple to refinance in about a year to a year and a half with the same finance company. Refinancing allows for a lower interest rate.