Finding An Auto Loan – Even With Bad Credit

If you have bad credit, you will likely encounter some difficulty getting an auto loan. In some cases where a person's credit report is very poor, they will not be able to get a new car loan, but can probably still obtain the financing to buy a used car. If you find yourself in this position there are a few things you can do to improve your credit, improving your chances to be approved for an auto loan and also get a lower interest rate.


The first step is to take a close look at your credit. Even if you believe your credit is poor, it may be that it is considered moderate credit. Request a copy of your credit report and credit score. Your credit score is a number between 300 and 850 that is used as a baseline to determine your eligibility for different types of credit. If your credit score is below about 550, you may find it very difficult to get an auto loan. 550 to 675 is usually considered moderate credit, while a score above 675 is considered excellent credit.

The credit score is only one part of the picture when applying for an auto loan. The other factor is your credit history report . This report contains details of your debts and the timeliness of your payments. It will also reveal the number of open credit accounts you have, and whether or not you have filed for bankruptcy in the past.

After you have received your credit report, make sure that all the items on it are accurate. Inaccuracies can make your credit appear worse than it actually is. If mistakes are discovered, the law requires that the item be removed from your credit report within 30 days; in fact, anything can be removed from your credit report if the creditor in question does not respond within 30 days. Removing negative items from your credit report is one of the most effective things you can do to improve your credit.

The next step to getting a car loan with bad credit is to clear up the legitimate problems that affect your credit history report. Pay down excessive credit card balances and close any unnecessary credit accounts you may have. As you pay down the balances you will lower your debt to income ratio, thereby increasing your chances of getting an auto loan with a low interest rate.

Once you have made all possible improvements to your credit, the final step is to compare lenders to find the terms you want and the best available interest rate. Whether you decide to purchase a new vehicle or a used one, be realistic about how much you can afford to pay every month. You don't want to tarnish the credit you have been working to improve. Building a record of timely payments on your auto loan will help strengthen your credit, so that the next time you finance a car you can put more money into your automobile, and less in your lender's pocket.


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