Your ability to get an auto loan is dependent on several factors including:
- Past Credit History
- FICO Score
- Income
- Utilization Of Credit
Most people can get an auto loan, but if you have been more than 30 or 60 days late on any payments, or have verbally abused the representative who called to remind you of your late status, it could go against you when the lender reviews your application.
In order to get your credit in shape, you need to mend things with the previous lender as much as possible. This may mean calling them to find out if they can do anything to help you.
One thing you should avoid doing is to apply for several loan options at once. This will drive your FICO score down.
Decide on what payments and what kind of car you can realistically afford. You may have a dream car in mind, but don’t play at getting it by applying for a loan. Wait until you are absolutely sure about the deal and then apply. The “hard inquiries” the dealer makes may remain on your credit report for up to two years,[1] so lock in the deal first.
If your credit includes charge offs or delinquencies, these may remain on your credit report for seven or more years and will look particularly bad to the new lender. Try to catch these up before applying for credit.
Some things you can do:
- Check your credit report. Go to AnnualCreditReport.com for your free annual report. This will immediately let you know what you are up against. Look for any errors and, if your score is low, find out what is dragging it down. Work on the items that you can control, such as making payments on time.
- The bigger down payment you can make, the better. If you can, pay as much as 10% or 20%. Also, try for a loan that can be refinanced at a lower rate after a year or two.[2] This will allow you to rebuild your credit and perhaps get a lower rate.
- Autotrader.com has a website that allows you to search for dealers who accept bad credit or low credit. The dealer may be able to set you up with a lender who will lend to you if your credit is not pristine. These deals may not always have the lowest interest rate, but you have a chance to get a vehicle you can afford and build up your credit score. Be sure to read all the fine print!
Finding the right auto loan may be difficult, but not impossible if you examine the possibilities.
[1] http://www.learnvest.com/knowledge-center/ask-credit-karma-how-does-my-auto-loan-refinance-affect-my-credit/
[2] http://www.autos.com/auto-loans/bad-credit-car-loan-tips-for-getting-approved
