Problems that can stem from a poor credit score
There are a number of problems that can stem from a poor credit score. If you’re in the market for a bad credit auto loan… it is important to know the impact and potential issues that can arise from having poor credit.
Credit Scores can affect your employment and insurance rates
Your credit score doesn’t just affect your borrowing ability. Increasingly, employers are using it as a measure of employee fitness. Statistics show that lower credit scores correlate with the trustworthiness of the potential employee. That means your credit score actually reflects on your character and could cause you to not be hired.
Also, insurance carriers are looking at credit scores because lower credit scores have been shown to correlate with a greater “loss risk” for drivers. That means that you’ll pay more for car insurance if your credit score is low.
Because of all these factors, it’s clearly in your best interest to improve your credit score if you can.
Even great credit customers could have lower than desirable credit scores
Interestingly enough, even if you are a great credit customer, pay all your bills on time, and don’t ever miss payments, you still could have a lower than desirable credit score. The reason for this is that people with good credit often have too many accounts on their record… many that they no longer use. In this case, you can probably quickly improve your credit scores by closing accounts with department stores, gas stations, and others that you don’t use anymore.
You may also have a lot of “inquiries” on your credit report. These can also negatively affect your credit score. Typically these are fairly easy to get off of your record.
A credit score scam that can cost you money
Unscrupulous dealers often use a credit score scam to get people into a higher interest rate loan that makes the dealership more money. They may even tell you that you need to pay extra “fees” due to your bad credit situation. Because of this, it’s prudent to get your credit scores before you go to the dealership and print them out for the dealer to see.
The scam basically works like this. You arrive at a dealership that has promised special “low rate” financing. You get all done with the pricing negotiations, fill out the credit application, and you’re ready to complete the deal. Then at the last moment, the salesperson comes out and says you’ve got a credit score of 640, which makes you a Sub-prime Borrower. Any credit score below 660 designates a sub-prime borrower.
As another tactic, they may also tell you that you have “B” credit instead of “A”. Unfortunately, because many people are confused about credit scores this often works with unsuspecting consumers. In this case, the dealer tells you that you don’t qualify for the special financing.
In either case, they then tell you that even though you don’t qualify for the “special” financing, you are qualified for a different financing that is at 12% or some other high rate. Though most dealers are honest and forthright in their business practices, it is better to be safe than sorry. Take your credit scores with you to the dealership. And make sure you know what your credit scores mean.