Having bad credit or what is sometimes referred to as “subprime” credit may not be the end of your car buying days. Plenty of lenders are willing to work with you simply because that’s how they make money. The more borrowers they turn away, the less money they make. However, they still need to make certain that while they are screening their loans they are reducing their risk – just as with any lender.
Before going car shopping and finding out at the worst possible moment that you aren’t going to be driving away in that cute little number you just test drove, do a little research to find out what obstacles you might need to deal with before heading to the car lot down the street.
There are all sorts of reasons someone may have “bad credit”. A lender will take these into consideration as he processes the rest of your information. For instance, a mortgage lender will be more interested in how you paid your last or current mortgage rather than worrying too much about your Macy’s bill. In the same vein, a car dealership will be looking at things like car repossessions, car payments, insurance payments, and your overall credit score. Do you need money fast? And have bad credit score, then there is no need to worry. The poor credit score is eligible to get the loan amount is real cash form. The checking of the credit score will not affect the requirements of finance or money from the loan company.
First, get a copy of your credit report; this can be done online. Make sure the report covers information from all three credit reporting bureaus, and get a report that includes your FICO score (this usually is an additional fee but well worth it). Read it for accuracy and resolve any issues you see. Credit reports are notorious for having incomplete or incorrect information, and even worse, they sometimes neglect to report positive information that would make you look better in the eyes of creditors.
Once you have a credit report with no mistakes, you are ready to car shop. Keep in mind we are only talking about getting rid of mistakes. That’s the best you can hope for at this point.
If your FICO score is 620 or better, you have a fairly good chance of getting a decent loan depending on how much higher than 620 it really is. Anything less than 620 is what they refer to as a “subprime” score and these are the ones that the lenders see as the highest risk loans.
No matter where you apply for the loan, however, they still expect you meet certain minimum criteria. You will need to have about two years of steady verifiable employment. Some lenders even ask for six months of bank statements to go along with employment verification because in a bad economy it’s common for a company to have layoffs and callbacks which could mean that even though you’ve had a job for two years, you weren’t working at full salary each week.
If you have had a car repossessed over the past year, you will have a problem no matter how great the rest of your credit history is.
Most lenders also require a minimum monthly salary which ranges from an average of $1500 to $2000 a month.
If you can meet these criteria, now you need to prepare yourself for the interest rate. Lenders are willing to talk to you, but the higher their risk, the higher your interest. Be prepared to be offered loans with APRs in the high teens and stiff penalties if you default.