Rebuilding Car Credit with Bad Credit Auto Loans

A credit card can help your FICO scores but a problem credit auto loan is usually needed to establish your auto credit

How to begin

Even if you qualify for a credit card you may have to apply for horrible credit auto loans to establish your car credit.

We know this can be true because for the past two decades we’ve been working in bad credit car sales through our dealerships and online here at Auto Credit Express.

Our web site also explains the no credit auto loans process so applicants can bypass a tote the note dealer and avoid the problems that often lead to repossession.

The need for bad credit auto loans

You may be wondering why you should even apply for a bad credit car loan. After all, paying cash for a car and using a regular or secured credit card can rebuild your credit.

The fact is, this usually doesn’t help your car credit, even if it does raise your credit scores.

This is because a credit card is a type of revolving credit. This means if you don’t pay off the entire balance every month, the credit card issuer will allow you to carry over (revolve) the remaining balance to the next month.

A car loan is different because it’s installment credit. With an installment loan, you sign a contract to pay back the loan amount, plus interest, for a fixed amount each month for the loan term.

Another difference is that in most cases, installment loan amounts are higher than revolving credit limits with a higher monthly payment as a percentage of the credit balance. Installment credit loans are also much less flexible to any changes, which mean buyers have to be more disciplined in paying them back.

Looking at car credit

In determining your credit scores, FICO looks at both types of credit. Automotive lenders also look at both credit types but put a special emphasis on how you paid your installment car loans. This means that while a good payment history with a credit card will help your credit scores, it doesn’t carry as much weight with auto lenders.

For this reason, even applicants with decent credit scores are sometimes turned down for a car loan if they’ve never had one or if it turns out that a previous car loan had a poor payment history.

In either case, these applicants might have to first prove themselves by establishing their auto credit with a lender willing to take a greater risk. In most cases, this lender will be one that deals with customers with poor credit.

But if you’ve been turned down for a traditional auto loan, where do you find a dealer that can get you approved?

We can help

At Auto Credit Express we help people with bad car credit find a dealer for their best chance at an approval for a car loan.

So if you’re serious about getting your auto credit back on track, you can begin the process now by filling out our online car loans bad credit application.

Posted on October 13, 2011 by in Auto Loans, Bad Credit, Credit Repair
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