Using a Bad Credit Auto Loan to Raise Your Credit Score
by Steve Cypher on Thursday, January 28th, 2010A bad credit car loan can enable consumers with bad credit to drive a reliable vehicle while reestablishing their car credit and improving their credit scores.
It’s what we do
At Auto Credit Express we’ve spent close to 20 years working with consumers who have bad credit and helping many of these same individuals improve their FICO scores and reestablish their automobile credit by financing a vehicle with a bad credit car loan. During this time, we’ve worked in retail dealerships as car finance managers, trained car dealers in special finance and developed web sites that match up applicants with car dealers in the U.S. and Canada that specialize in bad credit auto loans by dealing with the wide spectrum of lenders that is necessary in order to run a successful special finance department.
At the same time, we try to educate consumers on the loan process, since making a poor decision at the outset can potentially lead to visiting the wrong type of dealer or submitting a credit application to the wrong kind of online marketer.
But it recently occurred to us that it has been some time since we actually explained why someone would want to apply for a bad credit auto loan in the first place.
Bad credit car loans
If a recent economic event such as change in employment, large medical bills, divorce, or legal troubles has turned your good credit to bad credit, you should know that it is possible to regain a good credit score. There are lenders that serve the non-prime and subprime lending sectors that are willing to help those that, at one time, had a good credit score and now have bad credit, especially if they can identify a single economic event that caused the good credit rating to turn into a bad FICO score.
There are many instances when a consumer’s credit turns from good to bad that they end up losing their vehicle, either through bankruptcy proceedings or repossession. Once this occurs, the chances are slim that they will be able to finance their next car with a traditional lender. Most of these individuals will end up getting a bad credit auto loan through a subprime auto lender.
Getting a car loan after a bad credit experience really isn’t the end of the world, credit-wise, that many people think it is. On the contrary, qualifying for a bad credit auto loan presents a great opportunity to raise your credit score. When you purchase your car with this type of loan, however, there are a number of things that need to be considered:
Interest rate - The first loan taken out after a bad credit experience will be at a higher interest rate than you are used to.
It may take some time - Because of vehicle negative equity, you may not be able to refinance or trade in your car until at least ½ the loan term has expired (for example: 36 months or more on a 72 month loan).
Look to the future - In the future, you will qualify for a better rate if you make you payments on time.
Be smart when it comes to making your payments - If you don’t make your payments on time your credit will be even worse than it is now. If something goes wrong with your bad credit car loan, it will be even more difficult to finance your next car.
Get your priorities straight
Before you buy a car following a period of bad credit, you’ll have to decide what is most important to you. If re-establishing your credit is important to you we would recommend buying and financing an inexpensive car with a loan term of 36 months or less. By doing this and making your monthly payments on time, you have a good chance of trading in the vehicle after 18 months and qualifying for a much better interest rate the second time around.
But even after a bad credit experience, many people choose to purchase an expensive vehicle with a monthly payment that just barely fits within their budget. Often, these vehicles are financed for a 60 month or longer term. After 18 months, when their credit rating is better, it is nearly impossible to trade in the vehicle and get a newer car with a lower interest rate.
So if you choose to purchase and finance a vehicle for 60-72 months after a bad credit experience, you should plan on keeping that car, as well as your higher interest rate, for quite some time.
The bottom line
For nearly 20 years, Auto Credit Express has been helping people with credit problems get approved for new and used car loans. Our dealer affiliates work with a broad spectrum of bad credit auto loan lenders to get you approved. Since our inception, we have processed over 2,000,000 online bad credit auto loans and our dealers have closed over 1 billion dollars in auto loans.
For more information, please visit www.autocreditexpress.com to see what we can do for you.
Tags: auto loan, bad credit, bad credit auto loan, bad credit car loan, car finance, car loan, credit, credit rating, Credit Repair, credit score, fico, Fico Score, finance, interest rate, subprime
[...] Using a Bad Credit Auto Loan to Raise Your Credit Score | Auto Credit Express Bad Credit Car Loan Bl… http://www.autocreditexpress.com/blog/2010/01/28/using-a-bad-credit-auto-loan-to-raise-your-credit-score – view page – cached A bad credit car loan can enable consumers with bad credit to drive a reliable vehicle while reestablishing their car credit and improving their credit scores. [...]