Check (and know) your credit profile
In many cases, no matter what your credit profile is, Federal Auto Loan can probably help you get the auto loan or bad credit car loan you need! Our program connects you with a lender or auto dealer who specializes in helping people with bad credit get a loan for the car they need. Use the following examples to determine (generally) your credit profile and the type of auto loan you may need as a result!
In general, consumers with a “good” credit history will have at least a three-year history of having “paid as agreed” in their credit profile on their borrowing. Note that items such as “Unapplied for” derogatory items on the credit report (including such things as civil judgments from non-creditors as well as medical bills are often ignored in evaluating your credit profile. If you have a bankruptcy or repossession on your record, it will show up for a number of years. This is why keeping a solid credit history is so important.
Generally speaking, consumers with “fair” credit history will have shown a “paid as agreed” credit history for at least the past two years. Fair credit consumers may have an occasional late payment showing on their record. Note that if you don’t have a “paid as agreed” installment credit showing on your record (a mortgage or auto loan) within the last two years should have a good revolving credit facility. As noted above, a repossession or bankruptcy on your record will show and affect you. They should be at least 18 months to two years in the past, however, for you to get a fair credit rating.
Situational Bad Credit
In general, some bad credit rankings appear to be not as bad to a lender as other bad credit rankings. This includes consumers with a situational credit problem. In this case, you can usually identify a significant personal event or economic disaster that was the cause of the bad credit situation. Some examples of this include:
- Illness or physical injury.
- Divorce or marital separation.
- Unemployment from a job.
- Medical problems resulting in credit issues or bankruptcy.
These items tend to give you a more favorable lender evaluation (assuming that before the event you had good credit). In this scenario, the lender may assume that you really are a decent credit risk given your good credit history before the event.
Bad Credit or No Credit
In this case, we are talking about consumers with little or no applied-for credit, or consumers that have a large number of charge-off accounts including bad checks, unpaid charge accounts, unresolved repossessions, unpaid utility bills or medical bills, and other items that indicate the consumer is a bad credit risk. If you are in this situation, you really need to change your habits or you will remain trapped in the “bad credit cycle” and never improve your credit situation. In a no credit situation, a vehicle loan can help you establish credit, but you may need a cosigner to get a loan.
Really Bad Credit
Generally, these are consumers with significant credit problems that cannot be tracked to a single event. In other words, these consumers have a long-term history of bad credit behaviors. For example:
- Multiple charge accounts with charge-offs.
- Multiple Bankruptcies.
- Multiple repossessions outside of bankruptcy at different times.
- Significant bad credit showing following a bankruptcy.
- Current, substantial delinquencies on all (or almost all) existing obligations.
- Recent repossessions (typically less than a year old).
- History of writing bad checks.
These behaviors will, ultimately, lead to the consumer having virtually no chance of obtaining credit except with huge down-payments and very high interest rates. As was noted above, these habits will need to change if one wishes to get back to a more stable credit situation.
Knowing your credit profile can help you in understanding what the lender is seeing when evaluating you for an auto loan. Where you can make changes and improve your credit situation, this should be done. That’s the best way to get the auto loan you want at an interest rate you can afford.