If you're searching for a car, you probably want to be as prepared as possible when you find the dealership that can approve you for an auto loan. For bad credit car buyers, one of those steps is having a list of references ready to present to your potential lender.

When you have a solid credit history, having a dealer request a list of references is rare. But when you are working with a dealership that specializes in alternative auto financing, they look at factors outside of your credit to determine your reliability as a borrower. One of the ways they do this is by collecting a list of references from you.

What We Know

For consumers that have experienced recent problem credit and need a car loan, there's a good chance that at some point in the process, they'll need to furnish the lender with a list of personal references.

At Auto Credit Express we understand why this happens because, for the past 24 years, we've been helping car shoppers with bad credit find those car dealers that can offer them their best chances for car loan approvals.

We'd also like to point out that unlike the credit extended by BHPH dealers, the loans offered through special finance dealers can help buyers reestablish their car credit and, at the same time, afford them the opportunity to raise their credit scores. But because these loans carry a higher risk than a traditional car loan, there are a number of additional steps that must be followed in order for these lenders to fund a loan.

Auto Loan Documentation Requirements

How do you qualify for a car loan?

In addition to the normal documentation requirements for car loans such as proof of insurance and a valid driver's license, lenders who work with higher-risk car buyers usually ask for additional items that, in the business, are known as "stipulations" or simply "stips", for short.

In most cases, one of these items is a list of references.

What Makes a Good Reference for a Car Loan?

Many auto lenders require a minimum of six to eight references. At this point, you may be concerned about exactly who you would put down as a reference. While the lender is just looking for people who know you, it’s a good idea to have a nice mix of professional, family, and friend contacts on your reference list. As with anything else, put your best foot forward.

Most people don't answer the phone unless they're expecting a call, so as a best practice, contact each person you plan on using as a reference to ask their permission as well as let them know that a lending company might be calling to verify that they indeed know you.

Typically, bad credit car lenders require at least one family member that doesn’t live with you as a reference. Besides that, just about anyone you know personally can be a personal reference.

If you’re worried about the lender disclosing information about your credit to your references, don’t. All they do is reach out to a reference or two, ask a simple question to verify information, and move on – they aren’t going to share any personal information about you.

Since getting approved for financing is often the most lengthy and essential part of purchasing a vehicle, you should have all of your information in order before you arrive at the dealer. The more information you have on hand for the lender, the quicker the process will go.

The Importance of Good References For Car Loans

As a vital part of the car loan process, it's important that the references you choose for your lender are aware that you're listing them. A reference that's expecting a phone call from a lender is more likely to give you a glowing review than someone who's caught off guard.

Make sure you have references from a few areas of your life – at least one family member that doesn't live at your address, as well as a coworker or supervisor, and a good friend or two. It's a good idea to prepare six to eight references for an auto loan, even if a lender doesn't require this many, at least you're prepared.

Why are Personal References Important for Bad Credit Car Loans?When you put together your list, be sure to include:

  • Full names (no nicknames or abbreviations)
  • Complete home addresses
  • Home or cell phone numbers
  • Work phone numbers
  • Email addresses

Remember, the more information you can provide the lender the better. They're going to rely on the information given to them by the people you tell them to contact.

Why are References for Car Loans Important?

A list of personal references doesn’t determine approval, but they may help the lender verify your information. Subprime lenders usually don’t contact each and every reference you list, but it’s possible they reach out to a few and ask for identity verification, or possibly something else.

Lenders don't collect personal references just in case they can't get ahold of you one day. Sure, this is one of the reasons they ask to have a list of family and friends on file, but it's much deeper than that.

Personal references are just one part of the supporting documents you need to bring to the dealership. They help add another level of security for lenders, especially when a borrower doesn't have a good credit history. Proving to the lender that you're responsible and that you have people who can vouch for you goes a long way to offsetting the risk of lending to a borrower with poor credit.

Lenders use your personal references as a way to protect both themselves and you. These references provide:

  • Information verification – Lenders may ask your personal references to confirm some of the information on your application, such as where you live and your place of employment.
  • Identity information – They need to make sure that you are who you say you are.
  • Backup contacts – Just in case you miss a payment, or the lender is having trouble getting in touch with you, personal references provide another avenue they can use to reach out to you.

Additionally, by verifying your information with an outside source, lenders are reducing the possibility of loan fraud, which is a growing problem in the U.S. as identity theft becomes more prevalent.

Preparing for Success

The team here at Auto Credit Express has helped consumers nationwide find the bad credit car dealerships that could get them approved for auto financing, and we can do the same for you. If you're ready to make that purchase, complete our online auto loan request form and we will contact you to arrange a time to meet with the car dealership that can give you financing opportunities.