Absolutely! There are a lot of factors when deciding an approval for a car loan. A credit score is one of those factors, but not the only one. The term credit also refers to creditworthiness. This means that there are potential options available for an auto loan even with a bad credit score.
Lending institutions understand that life happens.
There are a few things to understand first. Let’s start from the beginning.
What is a low credit score?
Typically a low credit score is considered anywhere below 600. Scores typically range between 300 and 850.
However, there are a few different credit bureaus, who each have their own ranking/scoring system.
Factors that affect credit score
- Bill payment history (on time or not on time)
- Credit history age (how long since you have had credit/loans)
- How much debt you have
- Types of credit
- Credit Inquiries (each time a credit check /application is submitted)
Where to find credit score
There are many places to find your credit score. Some places charge money to check your credit score while others don’t.
Many credit card companies now also offer this as part of their service.
Creditworthiness isn’t just based on a credit score
Other factors are taken into consideration when banks decide to accept or decline a loan.
Decisions are usually based around risk factors.
If you have some proof that you are less of risk, banks will be more inclined to approve a loan for you.
The more stability you can show, the better.
Factors also considered for creditworthiness
- Employment status and history
- Financial obligations
- Types of accounts
- Total debt (used to calculate debt to income ratio)
What can I do to help get approved for a car loan with bad credit?
Have a down payment
A down payment helps with equity in the vehicle meaning less risk for yourself and the lender. It will also help entice the bank into approving a loan.
Do I need a co-signer for a car loan with bad credit?
Not necessarily. Co-signers are better used for instances where is there is NO credit (ie. first-time buyers).
Having co-signer can help in some circumstances, although as the primary buyer, it’s still your own credit that determines loan eligibility.
If I get refused from one bank, will I get declined everywhere else?
Each bank or lender has
How many hard pulls can
i have before it affects my credit score?
You do have the right to shop around for the best deal, which may mean submitting several applications.
Having all inquiries within a 14 day period allows it to count as one inquiry.
Multiple inquiries over multiple months result in inquiries that can lower your credit score.
What is ‘shotgunning’?
Shotgunning is a term used to describe applying to a whole lot of banks at one time.
The term is usually referred to at car dealerships. They will submit your applications to host of banks or lender to try and find the best rate/deal.
This may also be necessary to find a bank or lender that is willing to approve the loan.
As long these are all done within a 14 day period, it only counts as one inquiry.
Be sure you are ready to buy when you apply. Changing your mind and re-applying the next month will count as another inquiry.
Do I need a job to get a car loan with bad credit?
Usually, yes. Having a job shows that you have a way of being able to make the payments required to pay off the loan.
Having a job for more than 6 months or a previous job for a long time also helps show the bank/lender stability.
Provable income such as social security can also be used for a car loan.
Ready to apply for a car loan?
If you’re ready to apply for a loan, Fremont Motors specialized credit team can help. Click the link below, simply fill out the form, and choose the dealership you want to work with ( drop down box).
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