Four Tips to Getting Approved to Buy a Car With Bad Credit

June 3rd, 2009 | Posted in Credit Repair, Loans

It is entirely possible to finance a new or used car even with sub-par credit. There are even ways to increase your chances for approval and possibly reduce your interest rate. Do not seek an auto loan without first doing the research. If you have good credit you have limitless options. If, like many of us, your credit leaves something to be desired, you will need to search for a good deal. These four tips can help you get a car no matter what your credit.

What is a FICO score?

A FICO score will range anywhere from 300 to 850. The lower your score, the bigger a risk you are considered for a loan. This means a low FICO score will result in higher interest rates. You can still get a new or used car loan with a low FICO score but your interest rate will be impacted.

Take advantage of the Internet to get a copy of your credit report and score before applying for a loan. If your score is under 600 you should think about putting off your car purchase. Instead, use the time to boost your score.

Keep a steady job

Auto lenders often require applicants to have steady employment on top of checking their credit report. It is not uncommon to expect an applicant to earn at least $1200 a month. Steady employment is usually defined as keeping the same job for 90 days. Changing jobs every 2 to 3 months is not going to help. You may be asked for copies of recent paycheck stubs to verify your employment.

Consider a pre-approved loan from a sub-prime auto lender.

Before checking the local dealerships for a car, you might want to get a pre-approved sub-prime auto loan from an online lender. These lenders specialize in helping people with bad credit obtain financing. While their lending requirements may be flexible, sub-prime auto loans have higher interest rates. If you need a car now, you can consider taking the higher rate, and then trying to refinance it later.

Get a cosigner

One fast way to get an auto loan with bad credit is to get someone to cosign. If the person signing the loan with you has excellent credit, this may get you a better interest rate. Of course there are risks involved. If the primary borrower is unable to continue making the monthly payments, the cosigner will be responsible for those.