In the United States, about 30% of people have poor or bad credit. It is a general belief that having bad credit prevents people from making large purchases or getting a low-interest rate.
If you have bad credit, shopping for a new car can be a scary situation. Although getting a car loan with bad credit might seem difficult but it’s not impossible.
Read on to learn what your options are when buying a car with a low credit score.
Table of Contents
1. Don’t Neglect Looking at Your Credit Score
If you’re on the market for a new car and fear you have bad credit, the first thing you need to do is get a copy of your credit report.
The big credit bureaus measure credit scores using the following criteria:
- Poor: 300-579
- Fair: 580-669
- Average: 670-739
- Good: 740-799
- Excellent: 800-850
If you don’t know where your credit stands, you can request a free copy of your credit report.
2. Take Steps To Better Your Credit
Once you know where your credit score stands, you can take steps to improve your credit. If you can afford to wait a few months before buying a car, there are things you can do to improve your score.
For starters, you can start by paying off all of your bills on time. Lenders will report to the credit bureaus you paid on time, which will positively impact your score.
Many people also see an improvement in their credit score if they pay down a percentage of their debt.
3. Interest Rates
Before test-driving a car, you should learn more about the current interest rates for people with bad credit. Although the interest does tend to be higher, you should be wary of places that offer rates above the average.
4. Put Together a Bigger Down Payment
Even if your credit is not excellent, you can still get a car, but don’t be surprised lenders will ask you to get a bigger down payment.
A sizable downpayment can also help cover the taxes, fees and get you a better interest rate.
5. Crunch the Numbers
Before you arrive at the car dealership, you must take a good look at your budget. The last thing you want is to get a vehicle you cannot afford in the long run.
Besides the monthly payment, you also have to think about insurance, gas, and maintenance expenses. Set a number, you’re comfortable with and stick to it.
6. Get the Basics
If you have bad credit, lenders will have reservations with any large loan requests.
Even if you want leather seats, a sunroof, and GPS included, you might have to give up those things. You can still get a great car that will last you for a long time if you settle for a basic car.
Once your credit improves, your next car might be the car of your dreams.
Follow This Advice When Buying a Car with Bad Credit
After reading these tips, you’re one step away from buying a car even with bad credit.
Although buying a car with bad credit has its challenges, it’s possible as long as you do your homework. Start by learning your credit score, improve your credit, save for your down payment, and get the right car for your budget.
If you enjoyed these tips and would like to learn more, check out the rest of our business section.