Consumers with problem credit may be surprised to learn that a home foreclosure is no longer the black mark it used to be when it comes time to apply for an auto loan

What we know

Car buyers with damaged credit due to home foreclosure will now discover that higher-risk lenders are more lenient about this than in the past making it easier to qualify for a car loan.

Here at Auto Credit Express we see where this is the case and we should know because for over twenty years we've been helping consumers with poor credit find those new car dealers that can arrange for auto loan approvals.

Part of this help means providing applicants with an understanding of the bad credit car loans process. In a recent blog post, we discussed a number of credit issues that will typically trigger an automatic denial from many high-risk lenders. Today, we'll touch on a situation that was formerly on the list but now, for the most part, is not nearly the problem it once was.

Home foreclosure

Not that long ago – in fact, just before the recent recession - applying for a car loan from a subprime lender with a home foreclosure showing on your credit report was very close to being an "approval killer," although it also depended on the time that had elapsed since this occurred.

As with most "approval killers", it hardly mattered what was reflected in the rest of the credit report, if an applicant allowed their home to go back to the bank (a notation that remains in a credit file for seven years), most high-risk lenders saw this as an extremely negative entry.

Fortunately for many of these individuals, this is no longer the case.

Auto loans after foreclosure

For applicants that have gone through a home foreclosure, here is what they need to know as far as subprime car lenders are concerned:

1. Typically, it doesn't matter whether the foreclosure process has been completed or not.
2. It also usually doesn't matter whether or not the applicant is currently living in the foreclosed property
2. If an applicant is still living in the foreclosed property, the lender will use that mortgage payment in calculating their debt to income ratio
3. If the applicant has moved out of the foreclosed property, the lender will use their current rent or mortgage payment in calculating a debt to income ratio

Keep in mind that lenders of this type are looking for ways to approve an auto loan application, but the real key is that both the applicant and the deal have to fit within their approval standards. Because these lenders are used to seeing rough credit they normally place less emphasis on a single isolated event in someone's credit history and instead concentrate on other factors.

Credit-challenged car buyers should also be aware of the fact that these lenders are far more likely to approve someone with situational bad credit (where credit problems can be traced to a single event such as job loss) than consumers with habitual bad credit (someone who has never paid any bills on time). Paying well on a previous car loan will also increase the chances of an approval.

As we see it

For car buyers that been turned down for a conventional auto loan due to a home foreclosure, we want to stress the fact that there is an alternative to the many BHPH car dealers out there. Signing up for one of these loans won't help anyone's car credit situation because these dealers don't report loans or payments to the credit bureaus. This means that most of these buyers find themselves in nearly the same credit situation the next time they need a vehicle – even if they made every single car payment on time.

Instead, we suggest you check us out here at Auto Credit Express where we specialize in helping applicants with bad car credit find dealers that can give them their best chances for approved auto loans.

So if you're ready to reestablish your auto credit, you can begin now by filling out our online auto loans application.