The latest program from both Hyundai and Kia is certainly a step in the right direction by offering free, updated FICO scores to borrowers. Unfortunately for most credit-challenged car buyers, not only is its focus too narrow, what’s left unsaid is the minimum credit score or profile required to qualify for it.
Even with credit scores that fall into the subprime range, a number of these car buyers may still qualify for the consumer rebates, bonus cash and, usually, dealer cash offered on these vehicles – savings that will help lower the monthly payment and overall finance costs of a subprime auto loan.
The trend toward longer loans and higher payments is not a good one – especially for borrowers with problem credit – as this increases interest charges as well as the length of time a borrower is upside down in the loan.
Borrowers with credit issues, in particular, should keep the loan term and amount financed as low as possible so they can trade out earlier and into another vehicle with a more manageable interest rate.
If you have credit issues, everything else being equal, the more stability you can prove the better your chances of a loan approval. In addition to stability, the type of vehicle you’re considering as well as who you plan on buying it from also enter into the equation.
Likewise, bankruptcy situations as well as application accuracy are also important.
It may be stretching it a bit to say that this will help all members of the military and their families that have poor credit, since it probably won’t. But the fact is that even if a few of these buyers can take advantage of the expanded program, it represents a step in the right direction.
The latest survey of bank risk managers shows there’s a bit of caution in the car loan sector. To better their chances of an
approval, consumers with past credit issues need to make sure they have a down payment and, if a trade in is involved, any negative equity is offset by cash.