Just like filing for bankruptcy or having a car repossessed, a foreclosure can be stressful and lower your credit score. A foreclosure stays on your credit reports for seven years, although its impact lessens over time, which can make it easier for you to get approved for financing down the road.
Can You Buy a Car After Foreclosure?
The good news is a foreclosure isn’t the end of the world, and you can still get approved for auto financing. In fact, if you improved your credit by paying all your bills on time and eliminated debt, a mortgage foreclosure could have a minimal impact on your car loan approval odds.
The trick is to let some time pass so your credit score can improve, save up some cash, and work with the right lender. You probably aren’t going to be able to apply with a traditional lender if a foreclosure lowered your credit score, but you can prepare ahead of time by setting a budget and having a sizeable down payment ready.
Car Buying Options After Foreclosure
After a home foreclosure, getting pre-approved for an auto loan can be difficult, especially if the foreclosure is still on your credit reports. Although, if you have a good relationship with a bank or credit union, you may be able to get pre-approved – it doesn’t hurt to ask. If you get turned down for a pre-approval, you have two options to choose from when it comes to car buying:
- Special finance dealerships – Special finance dealerships work with subprime lenders. These lenders specialize in helping credit-challenged car buyers get approved. Unlike traditional lenders, subprime lenders look past your credit score to determine financing. They do look at your credit score, but they also use your income, employment, and residence stability. These lenders understand that things happen, and that a foreclosure can be caused by many things outside of your control.
- Buy here pay here dealerships – If you can’t get approved for financing through a subprime lender, and you need a vehicle fast, you can visit a buy here pay here (BHPH) dealership. These dealers are also the lenders and loan in-house. This means you can buy a car and get a loan all at the same place. Plus, BHPH dealerships don’t typically run credit checks, so they aren’t going to care if you have a foreclosure on your credit reports. The downside is that these dealers typically don’t report loans or on-time payments to the credit bureaus, so your credit score isn’t going to improve.
Need Help Finding a Lender?
Going through a foreclosure is never easy, and having a foreclosure listed on your credit reports affects your future loan approval odds, especially for big-ticket items such as a vehicle. If you recently dealt with a foreclosure, or have a foreclosure listed on your credit reports and worry it’s holding you back from getting an auto loan, let The Car Connection help.
We work with one of the nation's largest networks of special finance dealerships. These dealers are experts at assisting buyers with less than perfect credit. We'll work to connect you with one in your local area if you get the process started by completing our simple and secure car loan request form. Our service is free of cost and doesn't put you under any obligation, so you can get started with confidence today.