Follow These Steps When Purchasing from Bad Credit Car Dealerships

Due to some unfortunate circumstances in life, you may have incurred bad credit. However, it shouldn't interfere with your dream of owning a car. With luck and a bit of research, you can find suitable financing options for a car even if you carry bad credit (i.e., a poor credit score).

Learn about Credit Scores

Generally, your credit score is based on your credit history. Though there are a number of credit scoring calculators around, the one that matters the most to the market is the FICO credit score. The FICO credit score range runs between 300 and 850. Typically, a score amounting to less than 540 runs the risk of being denied an auto loan. On the other hand, a score of 740 or higher likely results in the best interest rate possible. Examine your score to determine where you fall in the spectrum so that you know what to expect from a bad credit car dealership.

Follow These Vital
Steps When Dealing with Bad Credit Car Dealerships

How a Bad Credit Score Comes About

A bad credit score results from two or three scenarios. You may receive a bad credit score if you fail to pay your bills on time to the point of being behind in payments without the ability to erase the debt at hand. In fact, your payment history comprises a huge part of your overall credit score.

Your poor credit score may also be due to the total amount that you owe in all of your accounts. In other words, the arithmetic doesn't work out in terms of what you earn and your ability to pay back the debt. It may be attributed to the way you manage your debt payments. For example, maxing out all of your credit cards is never good for your score.

Lastly, you can be considered a credit risk because you never established a credit history (i.e., you never pursued a credit card or loan).

Regardless of the reasons for your situation, acquiring a car via a loan is still possible if you cover some of your bases.

Study Your Credit Report

Before you approach bad credit car dealerships, it's best to know your own credit report and its history inside out. Essentially, you want to know exactly why your credit score is low. This way, you will be able to confidently explain your situation in case the dealership queries you.

At the same time, you can begin to rebuild your credibility when it comes to debt. For example, if your bad credit score is due to a lot of missed payments in the past, make a commitment to better manage your money so that you make payments on time to the bad credit dealership. It represents the first mile on the road to reestablishing your credit.

Get Real with Your Budget

A sporty, powerful ride is nice, but is it realistically in your budget? What you need to do is compute how much you can really afford to spare for a car each month. Take note that once you own one, there are a number of other costs that you must meet as well—fuel, maintenance and possible repairs among them. Make sure you account for all of these when you calculate your car budget.

Inquire About Auto Loan with Dealership

Be sure to check with the bad credit car dealership about their finance program so that you gain an approximate idea of how much you can expect to pay each month. During this discussion, ask how much you can expect to spend on repairs and maintenance services for the particular car you're buying.

Make a Sizeable Down Payment

Logic dictates that payments on a car are reduced in accordance to your down payment. The larger your down payment, the lower your monthly payments are. Manage as large a down payment as practicality allows. If you need some guidance, experts recommend a minimum of 20 percent of the car's value.

By following these steps, owning a car with a bad credit score is more than just possible. Simply resist the urge to add such upgrades as leather seats or tinted windows, keep your budget and monthly payments in mind, then gradually work your way back to good standing in the credit department.

Sources:

12 Tips for Buying a Car With Bad Credit, thebalance.com
How to buy a car with bad credit, consumeraffairs.com
Buying a New Car When You Have Bad Credit, edmunds.com

Categories: Car Dealerships