This is is a question that many drivers have these days. A bad credit score has made it very difficult for most drivers to secure a new car loan. However, the market is not dominated by people with perfect scores, and if you have manageable debt and a steady job, then there are options available to you that can get you a car loan.
While buying a car with bad credit is not impossible, it does require that the buyers have a good understanding of how the dealership’s financing works and that they have done their homework before making an offer for a car. Some buyers benefit from taking the advice of a trusted financial counselor, such as those at credit unions and banks. These professionals often have reviewed hundreds of loan offers and know which companies to contact and what rates to expect when dealing with less than perfect scores.
Check your credit score
The first step that any person buying a car should take is to get copies of their credit report. This can be done by contacting each of the three major bureaus; TransUnion, Equifax, and Experian. These companies are legally required to provide you with a free copy of your credit report every 12-months. If your reports show several late payments or ominous entries (like bankruptcy), then there are options to clean up your report.
If you find an error, go ahead and get it fixed with the bureau that is reporting it. Usually, this process does not require any contact with the creditor who reported the information; however, if there are multiple errors then you may need to reach out to them directly for corrections.
Get current on your existing debts
The main way to improve your credit score, and show future lenders that you’re a trustworthy customer, is to try to pay back any existing debt obligations that you might have. This means making payments to creditors and reducing the number of outstanding bills in collections.
Shop around for car loans
Now that you have cleaned up your credit, it’s time to make a couple of phone calls. Do not try to approach the dealer until after you’ve done some research and know what type of offers are available to you. Check the rates at several different companies using online calculators or calling their customer service lines directly. You should also consider car finance options that are specific to where you live, for example, if you live in Melbourne, you might want to search for ‘car finance Melbourne‘.
Set your expectations
When you pull into the dealership, it’s likely that you will be approached by several employees at once asking questions about your needs and budget. This is normal sales behaviour but don’t let them pressure you into settling on an offer right away. If you have done your research, you will know the average interest rates in your area and what type of car you can afford. You don’t want to sit down for an hour with them only to find out that they’re offering rates that are several points above the average in your area.