Car Loans With Credit Problems

Getting a car loan with a bad credit history is not always easy. Each lender sets its own standards for who qualifies for a loan, but lenders with bad credit face fewer options than those with good credit. Having bad credit doesn't necessarily mean you'll never get a car loan. It just means you may have fewer options and may have to wait until your credit improves.

Credit History

Your credit report contains the details of your credit history, such as how many credit cards you have and how often you pay your bills on time. A person with a troubled credit history usually has several negative events on his credit report, such as a credit card charge-off, bankruptcy or foreclosure. These negative items hurt your credit score, a number based on your credit report, and hurt your chances of getting new forms of credit.

Good Or Bad Credit

There is no one single credit score that means you have good or bad credit. Each lender sets its own guidelines for determining what constitutes good or bad credit. In general, however, a person with a FICO credit score of 700 or higher has good credit, while those with 600 or below have bad credit, according to the Federal Citizens Information Center. The lower your score, the harder it will be for you to get a car loan.

Credit And Loan Terms

Not only will a bad credit score make it harder for you to get a loan, but it will also end up costing you more in interest fees. For example, as of March 30, 2011, Community America Credit Union offered new vehicles loans ranging between 3.75 percent to 12.25 percent APR, and used vehicle loans of between 3.75 and 15 percent APR. Borrowers with bad credit are more likely to receive higher interest rate terms than those with good credit.

Other Factors

While low credit may not disqualify you from getting a car loan, your credit isn't the only factor lenders use to determine if you're qualified for a loan. Creditors typically take into consideration how much money you make. If you don't have a steady income or are self-employed and cannot provide a history of income, for example, you will have additional difficulty getting a car loan even if you have a good enough credit score.