A bad credit rating is a serious dilemma—it will affect a lot of areas in your life and make activities that are usually normal more difficult for you to accomplish, such as applying for a car loan. Banks and traditional loan institutions will likely decline your application, and this can be crippling not only financially but also emotionally.
However, if you are buying a car with bad credit, you must know that a negative credit rating will not paint the entire picture. There are some preparations that you can do in order to increase your chances of getting approved for your loan. Take a look at the items below:
- Get a good grasp of your credit score.
You know you have a negative credit rating, but just how bad is it? You need to know the exact status of your credit rating by getting a copy of your credit report. A credit report will let you know if all the information about your credit status is accurate and will allow you to have any errors corrected before you think about applying for a loan. Besides, awareness of your credit score is the first step towards solving the problem.
- Try to repair your credit score.
When buying a car with bad credit, the next step after understanding your exact credit situation is to take initial steps to repair your credit status. If you have old accounts that are dragging down your credit score, close and settle them. If you still have unpaid balances, start paying them off little by little. Take steps, no matter how small, to correcting the problem.
- Establish a stable source of income.
If you have a negative credit score, the first question a lender or car financer will ask is: how are you going to pay off the loan? It will be easier to convince them that you WILL indeed pay it off and that you CAN pay if you have a source of income. The recommended income background is a stable source for at least the past 6 months prior to the loan application.
- Save up for down payment.
The bigger the amount of down payment that you can pay, the bigger your chances of getting approved for a car loan. So, as much as possible, save up some extra cash for a while before you attempt to look around for a car to purchase. This way, not only will you increase the likelihood of loan approval but you will also increase the likelihood of being able to get a loan for the car at a smaller interest rate.
Given all these steps and preparations that you can do before you buy a car with bad credit, you can be assured that you will be properly equipped when you approach a car dealership once you’re ready to buy your dream ride. Good luck!