If you have been turned down for auto loans, it may be due to problems with your credit history. Having either damaged credit or little to no credit can make it difficult to get approved for financing. But you may be wondering why your credit rating is so important to lenders. If you have bad credit, why can’t they just let the past be the past? And if you’re struggling to build credit, why can’t they give you a chance to get started?
Paying off a balance that has gone into collections may or may not improve your credit score. You have to remember that, at this point, the original creditors no longer own the debt, so all decisions regarding the account will be made by the agency that purchased the debt.
Since most lenders that work with credit-challenged applicants only loan indirectly, what we do is match them to dealers in their area that represent their best chances to get approved for an auto loan.
For those with spotless credit, shopping around for an auto loan isn’t that big of a deal. But when you have credit that is less than perfect or in recovery, you should be more concerned about submitting a bunch of applications. When you submit a loan application, the dealership Finance and Insurance, or F&I, department will check your credit. This is known as a hard credit inquiry. When you are looking for a car, the credit agencies know that you will want to shop around, so any auto loan inquiries that take place within a 14 to 45 day window will only count as one, and typically won’t negatively affect your score.
It can be frustrating when you need to buy a car with damaged credit. Luckily, if you have a dependable income, there is a really good chance that you can get approved for financing in spite of your bad credit. Sometimes, “your job is your credit,” and it just comes down to finding the right lender.
Mark’s car was starting to give him problems. The issues were becoming so frequent that he was actually starting to factor the costs into his budget. Because of this, he determined that it might be time for a new vehicle. But he had one concern: he knew that his credit was damaged due to medical issues having caused him to miss payments on some bills. Mark told his friend Pete about his concerns. You see, Pete also has poor credit. What Pete told Mark wasn’t exactly encouraging. He would probably have to visit a lot of dealers, and in the end, end up with a so-so car and a high interest rate. But, there was a difference between Mark and Pete, one that would make all the difference.
You may think that your damaged credit will prevent you from being approved for an auto loan, but this may not be the case. Many lenders are willing and qualified to work with your financial situation, and if you’re willing to do a few things to help the process along, you could be back on the road in no time.