How to Buy a Car With Less Than Perfect Credit

A number of financing options exist for those in need of a new or used car provided you have good credit. Experian, one of three consumer credit reporting bureaus, says most credit scores fall between 600 and 750, with a lower score reflecting less than ideal credit.

However, there are creditors willing to finance your car purchase under strict terms if your credit is not perfect. Assuming you cannot put off buying until your credit improves, carefully explore options for the loan that is right for you.

Instructions

Instructions

1

Determine your credit score. Lenders will obtain your credit score when you seek financing, but you should have that information on hand before applying for a loan. Visit AnnualCreditReport.com to obtain free copies of your three credit reports, and pay the small fee to obtain one of your credit scores. Check your credit reports for potential inaccuracies, correcting mistakes with each bureau.

If your credit score is within Experian's "good" range, you may get credit without a problem. Other factors include your residence, job and down payment.

If your score is below 600, expect some trouble securing credit, at least with favorable terms.

2

Determine your budget. If you are set on a expensive car, your chances of obtaining a loan can be diminished. Even if you are approved for financing, your monthly payment could weigh you down.

Ideally, you should determine a budget based on income and expenses. A good online budget calculator can be found at www.bankrate.com; a link is offered in the resource box below.

Be realistic. When buying a car, you not only have to consider monthly payments but insurance and maintenance. Up-front costs include vehicle registration, taxes and tags and in some areas, property taxes. Include those costs in budget planning.

3

Shop for a car following the criteria established when you set up your budget. With less than perfect credit, lenders may expect you to come up with a sizable down payment of 20, 30 or even 40 percent.

4

Shop for a loan. Commercial banks, credit unions and other financial institutions are potential lenders. Before applying, explain to a loan officer your credit history and ask what rate is available. Do not authorize access to your credit report as that "pull" will lower your score. Only after you find a lender with a potentially favorable offer, fill out the application and give it permission to review your credit. Once you are preliminarily approved, a loan underwriter will likely follow with a formal approval.