Credit scores have a significant impact on buying a car because they will inform the auto lender of the probability of repaying the automobile loan. As for the fact, that there is no ‘cut-off’ in terms of obtaining approval, it is generally advisable to have a high credit score. However, it must be noted that even if the score is low, one is not completely locked out of purchasing a car as is the case with other contracts.
The Lowest Credit Scores
The credit score most specialists classify as poor is below 620, and it can be considered dangerous when it comes to loan approval. However, that does not mean that one cannot purchase a car if he or she gets a score within this range. In many cases, the dealerships that offer special financing and subprime lenders will be okay with borrowers who have scores above 500.
In fact, the bigger the better. The FICO categorizes any score that is above 660 as belonging to the good and excellent category of credit scores. The higher the rating, the more negotiating ability you will have better rates, and therefore more financing opportunities.
Characteristics associated with lower credit scores
Approval of car loans with poor credit implies that consumers agree to higher interest rates on car loans, short repayment periods, and less cash compared to consumers with compelling credit scores. You also will have to pay a higher down payment, it hardly goes below a thousand dollars in most cases. It is also customary that if you have bad credit, lenders will make deductions from your bank account automatically.
When your credit score is low, you are likely to buy second-hand cars only due to various limitations. Cars that you need to finance may not be new ones due to the high ratings that may be required of you to be above 620. It also becomes very difficult for subprime borrowers, those with credit scores below 600, especially in the 500s, to borrow and be able to afford new used cars.
Tips for Getting Approved
While it may be somewhat difficult, it is never impossible to obtain car loan financing when you do have bad credit. Some things can help boost the chances and these include: paying off all other monthly installments, paying a larger down payment, bringing proof of income of at least $1,800 per month, constant employment in the last 6-12 months, and buying cars at dealerships with special financing options.
It is also crucial to note that being a member of a particular local bank or credit union may help to increase your chances of getting approved for an auto loan even with a poor credit history. Being pre-approved before visiting the dealer lots serves to enhance your bargaining power and rates in equal measure.
Now let me make it clear that while buying a car with very bad credit in the 500s low range is hard and restricted it is possible with proper preparation. Getting subprime lenders that deal with car loans and ensuring that you have embarked on a process of trying to rebuild your credit score and financial status would be very helpful in ensuring that you get reasonable finance. Compare various loan options for people with low credit scores to get the best auto loans.
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