Car Buyer Labs

Car Buying Advice, Tips and Reviews

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Financing a Car with Bad Credit

Believe it or not, there are more than a few bad credit car finance options available; you just have to look in the right places. Sometimes bad things just happen, like your current vehicle broke down, you’ve lost your car in legal battles, or maybe you’ve never needed a vehicle until now. Often, people aren’t even aware of their credit score until they look into financing a car. In reality, millions of people apply for bad credit car financing, even though nearly 30% of people don’t actually know their credit score. Whatever the situation and whether it’s bad credit or no credit, it’s possible to build it up, but you have to know what makes up your credit in the first place.

What Exactly is Credit?

Getting a loan and financing a car can be stressful, especially for those with a credit score lower than 640. If you’re young and don’t have a long history, one wrong decision or missed payment can or will have a significant impact on your credit score.

New credit makes up 10% of your credit score. While it seems to be the least important of the factors, companies can tell if you’re attempting to build or fix credit by opening new accounts. Even if your cable bill seems completely unrelated to bad credit car finance, opening an account with a company is proof that you’re at least intending and attempting to commit to payments. Even inquiries can play a role in this portion of your credit score.


A man is filling out an application for bad credit car finance next to a woman and her laptop.The next 10% comes from the accounts that are in rotation. Different types of accounts, like car loans, student loans, cable bills, rent, and having a variety of account types play a part in your credit score. If you had a fabulous credit score from a single credit card, but the charges are made up of a Netflix subscription and a few delivery snack boxes for you and your dog, a car finance company might be a little concerned about a lack of large payments. Even if that’s the case, you can open new and different types of accounts to help the rotation as well as the previously mentioned new credit.

Fifteen percent is the length of your credit history. This is held a bit higher than the new credit or the types of credit because its a fact that history repeats itself. While a part of growing older is constantly learning from mistakes, you can’t argue with patterns. Old habits die hard, which can be troubling for those who aren’t too good with their money. Fortunately, bad credit car financing companies are willing to work with you through these habits and help shape new behavior patterns.

Your amount owed makes up another 30% of your credit score, but this one doesn’t exactly mean what you think it means. Rather than the total amount that you owe, but how much of your available credit is currently being used. It’s a good gauge for companies to be able to tell if you’re financially capable of making the intended payment, or if you’re exhausting your finances. Typically larger numbers mean a higher risk but not necessarily, which is why the payment history makes up a higher percentage.

Thirty-five percent of your credit score is made up of your payment history, which can be checked for free online through various websites. Your payment history is made up of account payments, delinquencies, and public records.

If payment history is what you’re worried about most, let me break that down a little bit. Delinquencies last seven years from the date, and while that sounds like a solid chunk of time, a few late payments aren’t unheard of, and most people have at least one, if not more. Civil Judgments also last seven years, but from its filing date. A chapter thirteen bankruptcy lasts seven years as well, but a chapter ten bankruptcy will last ten. An account that doesn’t have any negative history but is closed will last ten years, and any positive, open account, will last as long as it remains open. As long as you’re making payments on time, your payment history will fix itself over time.

Credit Check

If you’re already here reading an article about bad credit car financing, then you’ve probably already checked your credit, but sometimes different credit websites can give you slightly different numbers. Credit Karma is easy to use and navigate, and you have all of your credit and debts easily accessible. There aren’t many advertisements, and they get their score right from TransUnion. AnnualCreditReport is usually spot on because they get their reports from all three of the major US reporting companies: TransUnion, Equifax, and Experian, and you can get your exact score for under $10. IdentityForce and Identity Guard are reliable options if you’re looking to use their 30-day free trial.

A credit check is shown on a computer, which is a step in the process for bad credit car finance.

When figuring out your finances, it’s important to be realistic. Be honest with yourself with what you can afford. There’s a possibility that you may need a cosigner, and that’s okay, but don’t put yourself into a position that you’re relying on your cosigner. For bad credit car financing, you will have to make major decisions about your down payment and monthly payments. Be prepared to have to fix any mishaps that will inevitably happen to whatever vehicle you choose. While being realistic, also keep in mind that you may not get a new car. Often getting a used car is an excellent way to keep all of the payments down while still getting an auto loan to give your credit score a boost. It will only be a matter of time until your score improves and you’re able to trade up to a new vehicle.

Research and Communication

Doing your research is incredibly important. Looking around at different companies, cars, and deals will help you to make sure that you’re getting what’s right for you, not just what’s right for the dealership or what’s right for the banks. While you’re doing your research, you will run into scams. Sometimes there are hidden fees and unavoidable penalties that you don’t want to get yourself into. Take customer reviews into consideration and do your research, but that doesn’t mean you need to base your decision on one angry review.

All you have to do is communicate your situation, needs, and enter the deal with a level head. Whether you’re at a buy here pay here location, talking with your bank, or using an online lending network, being honest about all financial factors will help you avoid a dip in your credit. It takes away quite a bit of stress if you’re working with a team, rather than fighting with them because “they just don’t understand.” They want to help you because it really is a win-win situation if approached with excitement rather than aggression and denial. I’m not saying to be a pushover and enter a state of naivety, but try not to let the stress get to you because when all is said and done, you will eventually be driving off a lot with a new or used vehicle.

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