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Bad Credit Automobile FinancingHolding the keys to your new car can be an exhilarating experience. For many the delight of shopping for a new car is dulled by the consequences of a lack-luster credit score. Credit score is a three digit number that range between 300 and 900. Though with most lenders the yardstick for branding a borrower as prime or subprime varies, 620 have been by common consensus recognized as the official cut-off point. Typically, a credit score of less than 620 is considered sub-prime or someone who has bad credit; a prime borrower obviously suggests the opposite. For someone with bad credit finding auto-financing with reasonable terms and interest rates will be difficult. This space devotes itself to unfolding some simple yet intelligent ways to clinge a car-financing deal without burning a big hole in ones wallet. But first lets start with breaking some widely held notions.
Often subprime auto-shoppers labor under the assumption that they are undesirable for credit by the lending industry. The truth is quite the opposite. There is a whole industry of sub-prime lenders offering competitive rates to the borrowers. Financial experts agree that it is all the more important for sub-prime borrowers to comparison-shop when buying auto loans. There are plenty of credit grantors who specialize in subprime borrowing. The interest rates for subprime borrowers are steeper 18 to 20 percent in some cases - than those offered to their more credit-worthy brethren but researching the market for players in the loan industry might help you strike a good bargain!
For those who are looking for a new car but stuck with bad credit, consider shopping for auto-financing first and then a car. Below are some tips to finding affordable auto-financing for sub-prime shoppers.
Check Your Credit Report:
Right off the bat this is where a great majority of car buyers go wrong. Often the trivial takes precedence over the primary concerns. The truth about ones credit does not dawn until after the desired car has been taken out on a test drive and a price has already been hammered out with the dealer.
The smartest way is, to check credit scores upfront before setting foot in a dealers showroom. Start the process way before you plan your auto purchase. This will give you some time to challenge errors if any on your credit report. Inaccurate negative information can set you back by several points on your credit score thereby raising the cost of credit procurement (auto loan in this case). Remember, eradicating untruths from your credit history will take up 60 to 90 days by the credit bureaus!
Request a copy of your credit report from any of the three credit reporting bureaus the Experian, Equifax or the Trans Union. The 2003 Fair and Accurate Credit transactions act entitles you to a free copy of credit report once every 12 months from each of the three bureaus.
Access Your Credit Report:
For a long time credit scores were exclusively available to prospective lenders to evaluate the scores of those seeking loans. But now the restrictive nature of the credit score scene has been replaced by less conservative and more consumer-friendly features. It is now possible for consumers to access this all-important number. Go online and find your scores from the credit reporting bureaus. Alternatively, click on Bankrates Free FICO Score Estimator to find out your FICO scores. For those with bad credit, finding credit scores in advance can be helpful. It will clue them into where they stand in their search for an auto loan.
Make sure that your credit score is a true reflection of your credit history. A lot of times people fall into the sub-prime category because of incorrectness in credit report that depresses their credit score.
Do Not Rely on the Dealer:
Dealers can predate on poor credit circumstances. They can leave you saddled with high interest rates thereby limiting your car-buying options.
Car-dealers have tie-ups with banks, credit unions and financing agencies. They even have arrangements for extending credit to sub-prime borrowers. This might lure you into a one-stop shopping convenience but is likely to wind you into paying exorbitant rates. Dealers take a cut of all car financing deals as a result of which the interest rates offered by their tie-ups are bulkier. The ideal way to cut an affordable auto loan rate is to pre-fix your auto-financer through personal research before setting foot inside the dealership.
Shop for the Lowest APR:
Annual percentage rates or APRs vary from lender to lender. In a credit-lending environment lenders typically refer to what is known as loan tiers (A, A-, and so on). Discussing loan-tiers with loan officers will give you an insight into how these tiers relate to credit scores and interest rates. Next, keep the individual offers from different lenders in writing. Compare and contrast bids. Touch base with your bank that has your checking account and enquire about their auto loan rates. Sometimes banks view long-time customers with special favor and that might earn you a reasonably good interest rate. Shop for rates at a Credit Union particularly the one that has you on the members list. Credit unions in yester years had a reputation of extending loans to prime borrowers only but that has been changing yielding place to those with less than a perfect credit.
Shop online and you have a better chance of getting a fair rate. This is because the online market is very competitive and there are numerous companies who are vying for your business. Browse the net and you might come across some lender who is willing to offer you low rates, reasonable terms and minimal lending fees.
The biggest advantage of shopping online for a bad credit car loan is the convenience. Getting free rate quotes from multiple lenders is easy and can happen in a blink just after filling out a simple online application. Gather multiple quotes. Compare them and pick the one that suits you best.
Often shopping online is the choicest thing to do for those with poor credit. While it opens out countless possibilities, it also saves the stigma and discomfiture of a face-to-face discussion inherent in a deplorable credit situation. Besides, some intrepid online lenders brush off bad credit scores without as much as a blink.
The Blotch on Your Credit Report is not Permament:
When it comes to making amends to a dull credit the borrower has complete power to change it for the better. You can put your credit situation back on track by making simple yet effective alterations to your money management techniques. Current diligence can reap long-term rewards. So, as a first step towards fixing credit make bill-payments on time and abstain overextending yourself when it comes to loans and credit cards. Do not fill in applications for new credit such as credit cards, store cards or those pre-approved ones. Repeated inquiries can ding your credit score by as much as 10%. A small difference in credit points can be crucial for those who are treading the fine line between prime and sub-prime borrowing. When shopping for auto loans make sure to keep all your credit applications within a 14-day period so that they are counted as a single enquiry by the bureaus.
With proper attention paid to the state of your credit, you could conceivably hoist yourself out of subprime territory in as few as two or three years. To start with, your auto loan may seem a bit too expensive but in a couple of years, you'll probably be able to refinance your loan at a much lower rate. Another trick is to wait for a couple of months before seeking auto-financing during which you could work towards bolstering your credit score.
In fine, bad credit need not necessarily be interpreted as zero credit or unaffordable credit. A few simple steps and you could be well on your way to fulfilling your dreams of a new car.
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