How To Buy A Car With Low Credit Score
Once upon a time everything was perfect, you had a great job with a great income and then BAM! Life happened. For whatever circumstances your source of income wasn't enough to cover all your debt and unfortunately a few accounts went in default causing you credit score to go down. Later on you get back on your feet, get the accounts current but the damage is done, in your credit history is recorded that at one point in the past you couldn't pay on time your account(s). Now, an event that happened maybe a few years ago is haunting you and affecting the lenders decision on the credit approval for the vehicle that you are trying to buy. If you went through something similar don't worry, there's still hope!
In my experience I've found that to get approved after going through a rough time you have to work a plan and be prepared. What do I mean by that? Here's a few steps to work towards getting approved:
1. If you got declined for a loan, ask the person working the deal what will be the lender's conditions for you to be considered for an approval. Use this information to create a plan. If you haven't been to a dealer yet but you know your credit needs work, the lender's most common conditions are:
a) Need X amount of money down.
b) Need a Cosigner.
c) Need to verify income.
d) Need to verify address.
2. Be patient. One huge mistake I've seen often is when people are declined on a dealership they go to many others dealers running their credit, hoping somebody will say yes. Each time a dealer or lender looks at your credit it's an inquiry and that lowers you score and stays on record for 2 years. When a lender sees that you have been shopping everywhere and you wasn't able to get to an agreement at the previous dealers it raises a red flag. It's better to take the information of what you need to do to get approved, make a plan and work it.
3. Be realistic. Like the lenders, use your previous history to your advantage. I'll give you an example: Back in the day you had a car loan that was behind a couple times, maybe was repossessed and you got it back, maybe you let it go, a lender most likely will give you another chance at financing IF the vehicle you are trying to finance is LESS payment and LESS financed amount than the previous loan. Why? because your credit history indicates that you couldn't handle that payment in the past, even if you can handle DOUBLE that previous payment now, they will still like to keep you below the previous payment level. Remember that you need to build trust and relationship with the a lender again.
4. Be flexible. Your new loan most likely will have higher rates, if you have a payment budget in mind, the way to counter the higher rates is with a vehicle priced lower. I recommend you do research on prices for the type of vehicle you need and use this loan calculator with these APR% ranges: 0-4% Excellent. 5-9% Good. 10-17% Fair. 18-25% Low. This way you can have an idea of what you can afford.
4. Work the plan. Try to save money for a down payment. As backup, find somebody that will help if the lender suggest a cosigner. Bring verifiable form of income not older than 30 days, this is very important, you need proof on paper of what is your income, if it's not on paper it won't count. Bring verifiable form of address with your name on it i.e. utility bills like cable, water, electricity, etc.
Now that you know the steps to take if you are looking for financing with challenging credit, you can start working on that right now. Remember to be patient, at the end it will be worth it.
Sometimes in extreme challenging credit a lender still might not be able to extend credit, in those cases a person may need to hire a credit repair service to improve their score first.
I get it, you need that vehicle right now! And I want to help you accomplish that, no matter what's your credit situation, contact me here and we can discuss your options, or even lay out a plan for a future purchase.