Can You Rate Shop with Bad Credit?

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - May 25, 2018

Before a buyer starts looking for a good deal on a car loan by rate shopping, it’s important to know that they could be turned away more often with bad credit.

Rate Shopping and Your Credit Score

Rate shopping is a great way to see what different lenders are willing to offer a potential buyer. When shopping around for an auto loan, it helps to get multiple car loan quotes from various lenders to compare. A buyer shouldn’t settle for what they feel is the only option.

When a buyer rate shops, they apply for a car loan with multiple lenders and financial institutions in a given time frame (usually 14 to 45 days). Keeping rate shopping within the allotted time frame allows multiple quotes to get listed as only one hard inquiry on the buyer’s credit report. If the buyer rate shops beyond the given time frame, multiple hard inquiries can be listed, which impacts their credit score negatively.

If a buyer’s credit score is poor, they can still consider rate shopping, but they may not be able to get pre-approved from traditional lenders. Instead, they’ll need to visit multiple dealerships to see if they have subprime lenders. Many dealerships don’t advertise that they have a subprime department, so visiting multiple dealers can waste time, effort, and energy.

Preparing for Rate Shopping

If a buyer is set on rate shopping and they have poor credit, it’s recommended they do some prep work. A buyer should know an estimate of how much of a monthly payment they’ll qualify for, which they can do by calculating their debt to income (DTI) and payment to income (PTI) ratios. This can also tell them whether they can afford to take on a car payment.

To calculate their DTI, the buyer will need to take all of their monthly bills and divide it by their monthly income before taxes. A buyer’s DTI should be less than 45 or 50 percent, or else they may struggle to get approved for a car loan. To calculate their PTI, a buyer will need to divide their estimated monthly car and insurance payments by their gross monthly income. Lenders don’t want a buyer’s PTI ratio to exceed 15 to 20 percent. If either their DTI or PTI ratios are higher than these percentages, it may be best to wait until their financial situation has improved.

Shop with Confidence

If you’re in the market for a vehicle, but worry your credit will get in the way when rate shopping, CarsDirect wants to help. We work with a network of special finance dealers across the country that have lenders specifically designated for helping people with little to no credit. Let us help you find one in your area. Simply fill out our no-obligation online auto loan request form to get started.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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