10 Key Takeaways About Financing a Car With Bad Credit
Having less than perfect credit doesn’t have to mean giving up your dreams of automotive ownership. While poor credit makes it harder to qualify for car loans, it’s not always as difficult as it seems. In this guide, we offer ten tips to help shoppers finance cars even when their scores aren’t stellar.
Check Your Credit Report
Before applying for a loan or shopping for a vehicle at a bad credit car dealership utah, check your credit report and score to see what lenders see. If you find discrepancies and mistakes, file disputes with the three major credit bureaus (Equifax, Experian, and TransUnion).
Boost Your Score
While it may be challenging, it’s possible to improve your credit score with effort, time, and patience. The following strategies can help you build a better credit report and improve your chances of auto loan approval.
Pay On Time
Credit bureaus consider multiple factors when computing scores, but payment history is one of the most significant components. Making timely payments demonstrates responsibility and creditworthiness, and it can change your score for the better. If you’re forgetful, set up reminders or automatic payments to avoid missing due dates.
Lower Card Balances
High card balances in relation to credit limits may raise utilization ratios, which make up a significant part of your score. Try to keep your credit utilization ratio at 30% or below by paying balances and not maxing out cards.
Dispute Errors
Everyone makes mistakes, and the credit bureaus are no exception. Credit report errors can bring your score down, and that’s why it’s so crucial to review your report for discrepancies, unauthorized inquiries, and inaccurate information. By disputing these errors, you can quickly boost your credit score before buying a vehicle.
Mix Up Your Credit Portfolio
Having a range of credit types, including car loans and cards, will help you build a stronger credit portfolio. Lenders like it when borrowers handle debt responsibly, but it’s important to tread lightly and acquire new debt only when it makes sense to do so.
Limit Inquiries
Applying for several credit lines within a short time can be bad for your score. Multiple inquiries, sometimes called hard pulls, can lower your score temporarily. Try to time applications properly and request new credit only when necessary.
Offer a Bigger Down Payment
It’s possible to get a car loan with bad credit, but most lenders require larger deposits because it cuts their risk. By saving for a bigger down payment, you’ll borrow less, get more favorable terms, and make yourself look better to lenders.
Shop Around
While most dealerships have in-house finance departments, they’re not the only option. When shopping for a new car with bad credit, explore options from online lenders, credit unions, banks, and other providers, comparing terms and interest rates to find the best option. We specialize in helping buyers with bad credit, and we’d love to help you.
Get Pre-Approved or Find a Co-Signer
Seeking pre-approval for an auto loan can help you learn what to expect and give you an advantage when negotiating with dealers. Pre-approval allows buyers to compare various loan offerings without affecting their credit scores, as most lenders perform soft credit pulls during the process.
Co-signing is another option for those with less-than-perfect credit. If you’re lucky enough to have a family member or friend with a high score, ask them to co-sign your auto loan. While it involves some risk—after all, the co-signer assumes equal responsibility for the debt—it’s a great way to get into a financed car when you wouldn’t be able to afford it otherwise.
Bonus Tip #1: Find the Right Deal and Prepare to Negotiate
When looking for a car with poor credit, finding one that meets your needs and fits your budget is essential. As you shop, consider mileage, condition, age, features, and price. Pre-owned cars and trucks are a safe, reliable, and affordable option for those with bad credit.
Sellers expect to negotiate and used car dealerships are no exception. With pre-approval and a sizable down payment, you may be able to negotiate for a lower price, better terms, and a shorter loan term. Contact us to get pre-approved for an auto loan.
Bonus Tip #2: Be Wary of Extras and Prepare to Refinance
Many dealerships try to upsell customers, and those additions can substantially increase the cost of an automotive purchase. While some extras—such as safety systems—are beneficial, it’s crucial to consider whether they are worth the cost if you’re on a shoestring budget.
After getting an auto loan and making on-time payments for a while, you will likely see notable improvements in your credit. A higher score makes it easier to refinance a loan, which changes the terms and decreases spending. As your score improves, lenders will see you as a lower risk—and you’ll get better pricing, a lower interest rate, and a more affordable repayment plan. Not only will you save money over the life of the loan, but you will also pay it off sooner.
Why Choose Between Having Good Credit and Buying a Car? We Will Help You Do Both!
Poor credit makes automotive financing seem difficult, but it doesn’t have to be. By working proactively to increase your score and learn about loan options, you’ll put yourself in a position to find the best loan for your needs. When working toward financial health, persistence and patience are essential.
If you are ready to start your buying journey, we’d love to be part of it. Get approved for a loan today and browse our inventory to find the right set of wheels for your needs, lifestyle, and budget. Our friendly sales team members will walk you through your options, help you find a loan, and drive away in the car of your dreams.
Learn more about our dealership online, get pre-approved for an auto loan, or click to schedule service. We’re here to help everyone have the experience they deserve!
