How to Finance a Car With a Bad Credit Rating

Financing a car with bad credit may not be as difficult as you think. The website Bank Rate says banks and credit unions often approve auto loans to people with poor credit, partly because cars are easy to repossess, providing the lender with collateral for the loan. That means you could qualify for an automotive loan even if your credit score is below 620, which is the cutoff for "good" credit, according to Bank Rate.

Instructions

1

Obtain a free copy of your credit report from the website Annual Credit Report. The website was established by the three national credit bureaus, Equifax, TransUnion and Experian, to offer free reports as mandated by the Fair Credit Reporting Act. You also may order by phone by calling 877-322-8228. Order your credit score separately by following instructions on the credit report.

2

Evaluate your credit score. In 2008, Bank Rate reported that only 2 percent of Americans with credit scores had scores lower than 500, with overall scores ranging from 350 to 850. There is no rule for a minimum credit score required for loan approval, although the higher your score, the better your chances.

3

Review your credit report for any existing accounts that are reported as past due. Make payments to bring these accounts current before applying for a loan. Resolve any accounts that have been sent to debt collection agencies. Bank Rate says that because of your poor credit score, it's important that loan officers see that you're currently paying your bills on time.

4

Apply for a car loan at your bank or credit union. Bank Rate says you should avoid automatically settling for dealer financing or dealers who say they specialize in lending to people with bad credit. Banks and credit unions may offer lower interest rates even for people with bad credit. Apply where you bank, because having accounts at the bank could improve your chances for approval. Also, improve your chances by making as large a down payment on the car as possible.