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Buying Car With Bad Credit

Posted in Auto Loan by admin

If you’re considering purchasing a car but find yourself with subpar credit history, here are some tips for buying a car with bad credit that may help you through the arduous process.

Employment Check

The credit check process will begin with you providing proof of employment.  If you can show a consistent stream of income over a long period of time, that will work in your favor.  Typically, a lender will require you to show your three month pay stubs to prove that you have a job and that your salary is at an acceptable level.  But what you can do is offer to show your pay stubs for the past 24 months and show them that you have a steady job.

Payment History

Showing the lender your consistent payment history will help enormously.  Let’s say you got in trouble with your credit by making a bad real estate decision at the peak of the market and ultimately you had your house foreclosed.  That will certainly leave a negative mark on your credit history.  But show the lender that you’re willing to make your payments on time when you are capable of doing so.  Maybe you missed 3 mortgage payments that were over over $3,000 a month, and you simply could not keep up with the mortgage payments and you had to let the house go, but you chose to make all your other payments on time that you could afford even though you had to struggle through it.  Show them that your credit card bill in the past 24 months have all been paid on time.  And there has been no delinquent bills for your electricity, child care, etc.

Credit Metrics

The two metrics that your lender will punch into their system will be your FICO score and debt to income ratio (DTI). If you had a subpar credit history, your FICO score likely wouldn’t show well.  But you can try to keep your DTI lower by paying down your other debts.  Or even better, if you are not holding onto other debts, you can show the lender your monthly expenses compared to your income.  Show them that you can afford this new car.

There are hard money auto lenders that will work with people that have experienced hardships.  They may charge a higher interest rate on the loan and maybe even require access to automatically withdraw the monthly payments from your bank account.  If you are comfortable with all that, then you should be able to get a car and move on with your day to day tasks.