Financing for a Used Car for People With Bad Credit

When financing a used car, your credit rating makes a difference. An excellent credit rating is any number in excess of 750, good credit is between 660 and 749, fair credit is 620 to 659, and any rating below 620 is considered a poor credit rating. Obtaining financing with bad credit can be a challenge, but some companies will lend to people in this situation. If you have bad credit, be prepared to pay higher interest rates and make a large down payment.

Instructions

1

Contact the credit reporting agencies if you have experienced repossession or bankruptcy. If the repossession was part of a bankruptcy and an outstanding balance remains after the sale of the vehicle, pay the balance as soon as you can. If extenuating circumstances led to the bankruptcy or repossession, send a note to the credit reporting agencies (see Resources) explaining the reason for the repossession and ask that it be placed in your file.

If you have other open credit accounts, improve your credit rating by paying them on time. If possible, pay them off early. In about six months, your credit score will start to improve.

2

Limit yourself to two or three places when applying for pre-qualification. Making too many credit applications can make your credit rating worse. Pre-qualification lets you know in advance how much money will be required for a down payment and the dollar limit on the purchase price of the vehicle. Pre-qualification credit applications can be completed online.

3

Work with an auto loan broker to access loan companies that finance people with bad credit. Through their network, loan brokers are able to find the lowest interest rates and down payment options. Several companies promise to get you approved no matter how bad your credit is.

4

Try an auto dealer that offers in-house financing. In-house financing allows you to buy a used vehicle and make your payments directly to the dealer rather than an outside finance company or bank. Most dealers do not perform credit checks. As long as you make the payments on time, you don't have to worry about repossession.