Consumer Car Buying Advice Blog

With more car buyers needing a bad credit car loan in order to get financed there are a few steps that can be taken to make the process easier.

Why me

There are more than a few car shoppers out there uttering those words right now. At Auto Credit Express, for the past 17 years, we have been helping people with tarnished credit finance a car with a bad credit car loan. In that time, none of us have ever experienced the kind of economic turmoil that the subprime auto finance industry is currently going through.

At a time when more and more customers are finding their credit scores dropping due to events taking place in the economy (job loss, reductions in overtime, rising mortgage payments), subprime lenders are having to reduce lending due to the instability and high costs of the current securitization market – a prime source of funds for these types of institutions.

With that in mind, we would like to offer some advice on how you can give yourself a better chance of success when applying for a bad credit car loan.

Your credit

Know your FICO score (credit score) and what’s contained in your credit report. If possible, view your credit report at least six months prior to applying for a loan. By doing this, you’ll be able to correct any mistakes before visiting the dealer. If there are mistakes, correcting them will also raise your score, thus enabling the lender to offer you a lower interest rate on your next loan.

You can receive a free credit score from each of the three credit bureaus once a year. There are also companies, such as the one found at http://freescore360.com, that will, for a fee, furnish you with all three reports, and their credit scores, at the same time.

Your down payment

Set aside as much as you can for a cash down payment. Even with rebates and the possibility of a “cash for clunkers” voucher, bad credit car lenders still want you to have your own equity in the loan. The current economic climate has made a down payment an especially important component of a subprime auto loan.

The trade in

Speaking of down payments, if you are upside down in a vehicle and plan on trading it in, be sure you have enough in additional cash, or a possible rebate, to cover pretty much all of it. Given the current economy, bad credit lenders do not like negative equity. Also remember that if your trade qualifies as a “clunker”, the voucher is not in addition to what your car is worth – it merely takes the place of whatever you would’ve received had you traded it in (the dealer can’t keep the car – it has to be scrapped).

Debt to income

Be sure that you have enough income to make the monthly car and insurance payments – and that you can prove that income.

If you need help, there are calculators on the Auto Credit Express web site that will walk you through the process. Be aware that subprime lenders will ask for proof of your income from payroll check stubs and W-2 forms. This means that if you are a waiter or waitress and you don’t declare all your tips, you could be in trouble if your expenses are not in line with the income you reported on your tax forms.

The Bottom Line

At Auto Credit Express, we are here to help you reestablish your credit. If you have any questions that haven’t been addressed on our web site, feel free to contact us at the toll free number, during our normal business hours, located at the bottom of every web page.

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