Bad Credit Can Affect Your Ability to Buy a Car
It seems obvious, but for many it is still a difficult lesson to learn. Credit history can seriously impede your ability to purchase a car, new or used. This is because auto loans use many of the same criteria as mortgage and other personal loans.
Lenders will look carefully at your history of obtaining and paying off debt as well as how much current debt you’re carrying in relation to the total credit available to you. They will also look at how much you earn and are projected to earn during the term of the loan. Lastly, they will examine your current expenses, such as mortgage or rent, student loans, and credit card debt.
This doesn’t mean you won’t be able to get a car loan. It just means that the terms are likely to be much less favorable than you planned. Bad credit scores can increase interest rates as well as affect the amount of down payment required or even change the length of the loan offered. All these can result in not only a higher cost for the car, but also higher payments each month.
It’s a good idea to get a copy of your credit report before you start shopping for a car loan. This way you can identify any inaccuracies on the report and take steps to fix them. Having the cleanest possible report is the first step to improving your negotiating position with lenders. As long as you are honest about past credit problems and realistic about the terms you’re likely to get, it’s still possible to get some sort of car loan.