Sometimes life hands us lemons, and those lemons can sour our credit score. If you’ve had a major life event that burned your credit, it can be hard to get approved for things you need, like a car loan. However, there are some lenders that may be willing to work with your situational bad credit.
Different Kinds of Bad Credit
Situational bad credit is different from habitual bad credit, and is usually viewed more favorably too.
Habitual bad credit is what it sounds like: the borrower may have made a habit of missing payments, mismanaging accounts, or defaulting on loans over time. Having a habitually bad credit score can mean having to overcome negative marks that may have been the result of poor financial management.
Situational bad credit, on the other hand, is when a life event causes a rift in your finances. In turn, this event extends into your financial health and can ruin your credit score. Here are some common examples of situational bad credit scenarios:
- Illness
- Divorce
- Disability
- Work injury
- Bankruptcy (due to situational reasons above)
There are instances where borrowers get too sick to work, which can result in missing payments and lower credit scores. Divorce can often lead to finances being split up, and confusion on which spouse pays what. All of the examples above can cause big problems, and turn a good credit score into a poor one in a matter of months. It doesn’t take that much to drop a credit score – even one missed payment can remain on your credit reports for up to seven years.
Despite situational bad credit lowering your credit score, you’re not out of the running for new credit just yet. There are still auto lenders that can help if you meet their requirements, and they’re called subprime lenders. Financing a vehicle may be more difficult for people in habitual bad credit situations, but, in some cases, subprime lenders might be able to offer a hand, too.
Bad Credit Auto Lenders
Whether a life event caused your poor credit, or you simply neglected some bills (it happens), looking for a subprime lender may be your next step in getting your next car. To get in touch with one of these lenders, you need to find a dealership with a special finance department. Subprime lenders are third-party lenders that work through dealers.
Meeting the requirements for a bad credit auto loan means proving you have the ability, stability, and willingness to pay for a vehicle. This translates to proving you have the income, steady living situation, and down payment, that are all ready to take on a car loan.
Here are some requirements of subprime auto lenders:
- You have an income of around $1,500 to $2,500 a month before taxes. Computer-generated check stubs are needed to prove your income.
- You have a steady work history of at least the last three years, without large gaps (typically 30 days or longer) between jobs. Lenders usually require that you’ve held the same job for around one year.
- You have a working phone, either a contract cell or landline phone that can be proven with a recent phone bill. Subprime lenders don’t accept prepaid phones.
- You have a valid driver’s license that isn’t expired, suspended, or revoked. It must list your current address.
- You have a permanent residence. This can be proven with either a recent utility bill or bank statement in your name.
- You have a down payment of at least $1,000 or 10% of the vehicle’s selling price. A trade-in with equity can also help meet this requirement.
- You have a list of personal references, usually between five to eight people with complete contact information (phone, address, email, etc.). A personal reference can be anyone that doesn’t live with you.
Depending on your credit situation, you may be required to bring more or less documents. For example, if you were recently discharged from bankruptcy but it hasn’t shown up on your credit reports, you may have to prove it. Simply have your discharge papers handy to prove you’re in the clear for new credit.
These requirements are used to determine how ready you are for your next auto loan. Luckily, most of these documents are things that you can get pretty easily. Start compiling your proofs now while you look for a dealership with bad credit lending options, and we can help with that!
Dealerships and Subprime Lenders
Finding a dealer that’s signed up with subprime lenders could get tricky – how do you tell them apart? That’s where Auto Credit Express comes in because we know how to distinguish them!
We have a nationwide network of dealerships that have special finance departments. These locations are prepared to work with borrowers in many different credit scenarios – habitual or situational.
To start the search of dealers in your area, fill out our free car loan request form. We’ll look for a dealership near you at no cost!
