In most instances there is only one way for credit challenged consumers to once again qualify for an auto loan with regular interest rates.
What we do
At Auto Credit Express we've spent the last 20 years working with consumers who have bad credit and helping these individuals raise their credit scores and reestablish their car credit by filling out our online bad credit car loan application and financing a vehicle with a bad credit auto loan. Along the way, we try to provide our applicants with the information they need in order to understand this type of loan, since the wrong selection can trap them in a loan they can't afford which could result in a repossession that could lower their credit scores.
This also means understanding why it really is necessary that most bad credit customers will need to go through the process of first financing at least one vehicle with a bad credit car loan in order to once again qualify for competitive interest rates on a car loan.
Why go through the process
Here at Auto Credit Express we've heard this question before: “Why should I get a bad credit car loan? I can pay cash for a car or buy one from a tote the note car dealer and get a credit card to rebuild my credit.” Even though this would seem like a logical approach, there is at least one reason why it probably won't work – even if this does raise your FICO score.
Revolving versus Installment
A charge card is a type of revolving credit. This means that if you only make the minimum payment and don't pay off the balance every month, the credit card company will allow you to carry over (revolve) the remaining balance to the next month – while charging you interest on the remaining balance for this privilege.
A car loan is a type of installment credit. With installment credit, you sign a contract to pay back the amount borrowed, plus interest, for a set amount per month for a fixed term (such as $300 per month for 48 months). As a rule, installment credit lines are usually much higher than revolving credit lines and require a higher monthly payment as a percentage of the loan balance. Installment credit contracts are also much less flexible to any changes in the loan terms, meaning that the buyer has to exercise more diligence in paying back the loan.
What car lenders consider
In determining your credit score, the credit bureaus include both types of credit. And while automotive lenders will also look at your entire credit history they put a special emphasis on your installment car credit history. To put it another way, while a good payment history with a credit card will help your credit score, it is not the strongest type of credit to bring to the table if you're applying for a car loan.
For this reason, many applicants with decent credit scores can still be turned down for a car loan if they've never had a car loan before, or if it turns out that that one of their previous car loans had a spotty payment history. In both these cases, the applicants might have to first prove themselves by way of a car loan with a solid payment history through another lender – and in most cases, that lender will have to be a bad credit lender that caters to a lower tier of customers.
Why web sites such as Auto Credit Express can help
At Auto Credit Express we have helped thousands of people with bad, blemished, bruised, and tarnished credit buy cars and reestablish their auto credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. So if you are serious about getting your credit back on track, you can begin the process right now by filling out our secure online bad credit car loan application.
For more information, feel free to visit www.autocreditexpress.com to see what we can do for you.