The economy hit many of us hard, and many of us are still recovering from layoffs, medical problems, and other financial setbacks. And it can make you wonder if you’ll be able to afford a car from a reputable source, instead of buying a car off Craigslist and hoping for the best. But bad credit, even no credit, car loans are available: You just need to understand what lenders and dealerships are looking for.
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Why Does Credit Matter?
For lenders, the question comes entirely down to simply this: If they loan you the money, will you be able to pay it back? Remember, lenders make their money by charging you interest on your loan, so the question of whether you’ll be able to make payments isn’t just about getting their money back, but keeping the doors open.
As a result, lenders want to know just what a risk you are, which is where the famous, or for some infamous, credit score comes into play. Generally provided by Experian, TransUnion or Equifax, your credit score is an attempt to boil down your previous credit history into a simple number anyone can understand. What you may not know about it, though, is that it’s not the be all and end all of your ability to secure a bad credit car loan.
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More Than A Score
Any smart lender is fully aware that a credit score is a subjective tool. It’s a highly useful one, to be certain, but it’s still just one part of your overall credit history and your current financial situation.
For example, it’s fairly common, especially in cases where you’re an independent contractor or you don’t have much credit history, to be asked to provide your weekly pay stubs or your tax returns. This will do two things. One, it will establish that you have a steady income and are able to make your monthly payments, and two, it will show that you’re reliable. Somebody who works hard and shows up to their job on time every day is a far more reliable risk.
Similarly, you may be asked clarify some hard times that you’ve faced in the past. It’s not something many of us enjoy, but again, it helps clarify your actual history. As we noted above, many of us have experienced some form of setback over the last few years, to the point where loans classified as “subprime,” for those with bad or no credit, have grown enormously in the last few years. Realistically, they had to: Otherwise, dealerships and manufacturers wouldn’t be able to sell cars.
Still, they will look at your credit history. So, what should you do?
Fixing The Score
Start by taking the legwork out of the situation: Go to a dealer with documents that prove your current income handy, so when they ask, you’ve got them right there. Also make a point of checking your credit report for errors; it’s not unknown.
And, above all, remember that they want to sell you a car you can afford. Work with the right lender, and a bad credit car loan can happen with ease.