These days, having a reliable car is essential for everyday tasks such as going to work or dropping your kids off at school. However, purchasing a car with bad credit can be hard, even with a stable income and consistent job history.
Bad credit doesn’t stop you from getting a car, but you will need to shop very carefully and be prepared to pay an overall higher cost than a person with a healthy credit score. It is essential to be as informed as possible to avoid being taken advantage of by the dealerships commissions-based finance department.
Work on Your Credit Score
In the months prior to purchasing a vehicle, you must work on your credit before going car shopping. Check your credit report and score religiously, especially if you have a history of late payments and past-due accounts. Do not take on any other credit obligations before searching for a car, including new credit cards. Be sure to be on your best behavior and make your payments on time while finding ways to pay off your past due balances.
Limit Your Search to 2 Weeks
When financing a car, dealerships will check your credit score, and each and every “hard” check on your credit score will have a negative impact on it. However, most credit scoring models usually count every credit inquiry performed by a lender within a 2-week time frame as just 1 single inquiry. It is important that you only apply for auto loans when you are confident that you will take one out, otherwise, you risk negatively impacting your score, even more, making it harder and more expensive to finance a vehicle.
Shop Around for Your Loan
Even with poor credit, there are hundreds if not thousands of financial institutions that specifically work with people with low credit scores to finance a vehicle. Most dealerships have their own financing department, but many banks, credit unions, and specialized businesses offer loans for people with poor credit. Be wary of “Buy Here, Pay Here” dealerships. Often times these dealers do not check credit but sell you overpriced, poor-quality vehicles.
You can also shop more realistically when you have a pre-approved loan amount that you can work with. A credit union should be your first stop on your auto financing journey. If your local credit union is unable to finance you, your car salesman may be able to put you in contact with a lender that caters to car buyers with bad credit scores.
All in all, shopping for a car with poor credit can be stressful. People with bad credit are also targets for scams, so it’s important to take your time and tread carefully. Plan our exactly what this vehicle will cost you with payments and interest rates in the long term. If possible, aim for a short-term loan with a lower interest rate. Do not fall for dealer up-sells and be sure to know your budget and shop at or below that amount.
If you are in the market for a new car with less than ideal credit, CrediReady can help. We can connect you with our nationwide database of trusted lenders and dealers to find the best auto loan for you. Take a moment to fill out our free no-obligation form today and start car hunting today!