How to Refinance an Auto Loan With a Bad Credit Score

Credit plays a vital role in American society. Information in your credit report impacts your credit score. Your approval for a mortgage, credit card, car loan and even a job depend upon this score. If you're experiencing credit problems and have a bad credit score, it can be difficult to obtain financing. Fortunately, there are lenders that specialize in providing financial assistance to consumers with less-than-perfect credit.

Instructions

1

Gather your salary information and all pertinent details of your current loan. Know how much you owe, current interest rate, car mileage and the vehicle identification number (VIN). Keep up your current payments while you search for a new loan.

2

Check the value of your car and compare it to the outstanding amount of your loan. Like with home loans, it will be extremely difficult to refinance a car loan if the amount you owe on the car exceeds the value of the car itself. This is referred to as being "upside down" on a car. Several websites, such as the one run by Kelley Blue Book, can help you make that determination. See the Resources section for the link. If you are upside down, make a few more payments until the loan value gets closer to the car value.

3

Purchase a copy of your credit score to see exactly where your credit stands. The Fair and Accurate Credit Transaction Act (FACTA) requires credit bureaus to give you a free credit report but not a free credit score. They're allowed to charge you a fee for that service. According to Fair Isaac, inventors of the FICO scoring model, the FICO score is the score lenders use most. You can order yours at myfico.com.

4

Compare auto loan refinance companies to see which one works best for your situation. Look for a lender that accepts applications from consumers with bad credit; otherwise, you will waste your time and add unnecessary inquiries to your credit report, which may further lower your score. Choose at least two lenders. See the Resources sections for lenders that specialize in bad credit loans.

5

Submit your applications online. This will speed up the loan process and may allow you to check the status of your loan application as it progresses. Be as accurate as possible. The lender will use the information that you submit to determine if you're approved or not. Avoid giving false or misleading information. If you receive a loan based on false information, the lender may consider that fraud. Read its Terms and Conditions policy before you apply.

6

Wait to hear back about your approval. If you're approved by both lenders, then you have the luxury of comparing the two offers to see which one is best. Read the loan details thoroughly and know if there are any added fees involved. Ask questions if anything seems unclear. Once you've made your decision, sign the documents and continue with the refinancing process. The lender will instruct you on what steps to take next.

7

Wait six months to apply again if you're not approved by a lender. Continue to make your payments on time and avoid any late payments on your other accounts. This will help improve your credit score so that you will be in a better position to qualify in the future.