There isn’t a hard-and-fast rule about where your credit score needs to be to get into a car loan, but where you get your next vehicle could depend on your credit score.
Credit Scores and Car Loans
Auto lenders vary, and so do credit circumstances. When it comes to traditional lenders, such as those from banks, credit unions, or some captive lenders of automakers, they tend to prefer good credit borrowers.
The answer to what credit score you need to buy a car depends on who you ask. However, according to the credit bureau Experian, a person with a credit score of 661 and higher is considered to have prime credit. Anything lower than that may result in traditional lenders turning your down for financing. However, a low credit score doesn’t mean you’re out of the running for an auto loan.
For people with credit challenges, getting a vehicle loan approval from a traditional lender can be difficult. There are, however, subprime lenders that specialize in lending to borrowers with credit issues.
Bad credit car loans can be a good way to get your credit back on track and get you into your next vehicle.
Special Finance Dealerships
If going through traditional auto lenders hasn’t been working out for you, it may be time to look into subprime car loans.
Subprime lenders are signed up with a dealer’s special finance department. These lenders look at many aspects of your financial well-being. For borrowers with no credit history, or bad credit borrowers with bumps on their credit reports, special financing with a subprime lender can be an avenue to an auto loan and credit repair.
Just because subprime lenders don’t just consider your credit reports alone during the approval process doesn’t mean that it’s a guaranteed route. They need to verify your income, address, phone number, and other information. You also need to prove you have enough income to pay for the vehicle, and you’re going to be asked to bring a down payment.
As far as how much income you’re likely to need, subprime lenders typically require around $1,500 to $2,500 a month before taxes at a minimum. For a down payment, expect to need at least $1,000 or 10% of the car’s selling price (sometimes whichever is less).
To be considered for an auto loan approval, you’re likely to need these items:
- A recent computer-generated check stub to prove your income
- A recent utility bill or bank statement to prove your residency
- A recent phone bill to prove you have a working phone
- Your valid driver’s license to prove your identity
You may need to bring more or less items to verify your information, but these are the typical items requested by subprime lenders.
Auto Loans and Repairing Credit
Even if you have a lower credit score right now and you may have to look for special financing, it doesn’t have to be this way forever! You can build your credit from subprime to prime by giving your credit time to heal, having diligence, and getting special financing.
Nearly every negative mark that can be on a credit report falls off after seven years. Even if you’ve missed a few payments here and there in the past, they won’t haunt you forever. Additionally, keep in mind that your credit score is largely influenced by your payment history, which means that staying on top of your finances from now on can mean a better credit score later.
If you always make a point to know where you fall on the credit score spectrum, and regularly check your credit reports, you can work to improve your credit. Keep your credit card balance(s) low, make all your payments on time, and apply for new credit only when you need it. These are some of the best things you can do to improve your credit score.
Auto loans, too, can really give a bad credit borrower a credit boost, since the potential in repayment history can do wonders. Subprime car loans offered at special finance dealerships are reported to the major credit bureaus, which means that your on-time payments can raise your credit.
Next Step to a Car Loan
Now that you know what items you’re likely to need to get into a bad credit car loan, you can begin the search for the lending resources you need. Subprime lenders can be hard to find, but we want to help with that.
Here at The Car Connection, we have a network of dealerships – coast to coast – that are signed up with subprime lenders. To take the next step in your car buying journey, start by filling out our auto loan request form. It’s free, secure, and there’s never an obligation to buy a thing. Let’s get to work!