I Have a Charge-Off on My Credit Report, Can I Get a Car Loan?

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.


, - November 25, 2019

A charge-off is listed on your credit reports once your creditor decides the account is uncollectible. Charge-offs stay on your credit reports for up to seven years from the date of your first missed payment. The good news is that you can bounce back from a charge-off and take steps toward rebuilding your credit score – plus, you may still be able to get a car loan.

What Auto Lenders Work with Charge-Offs?

Unless you have an excellent relationship with your bank or credit union, you’re more than likely going to get turned down for an auto loan with them, depending on the amount and number of charge-offs listed on your credit reports. It doesn’t hurt to try to get pre-approved with them, but you may need to work with a different type of lender.

Charge-offs damage your credit score if you don’t stay on top of your monthly bills and pay them on time. If your credit is damaged because of a charge-off, or multiple charge-offs, you typically have two other types of lenders to work with if you want a car loan:

  1. Subprime lenders – These lenders work through special finance dealers, and tailor their loans to consumers struggling with credit. Subprime lenders use your credit score to determine approval, but also consider additional factors such as your income and residence stability. You must meet their approval requirements, and some require you to include a cosigner.
  2. Buy here pay here dealerships – Buy here pay here dealers offer in-house loans for the vehicles on their lots. Compared to subprime lenders, it’s a lot easier to get approved for an auto loan at one of these places because they typically don't use your credit score. To qualify, you simply need to meet the income requirements and make a down payment.

One thing to keep in mind: with both types of lenders, you can expect your interest rate to be higher than average due to the charge-off(s) on your credit reports. You can offset the higher rate by making a larger down payment, or possibly by adding a co-borrower or cosigner with good credit to the loan.

Getting Rid of a Charge-Off

When a debt is charged off, you’re still responsible for it unless the statute of limitations has expired. The good news is that you have options to choose from when it comes to getting rid of a charge-off:

  1. Pay the lender – The easiest way to handle a charge-off is to repay the original lender. Once all is said and done, make sure the charge-off is changed to a “paid charge-off” on your credit reports.
  2. Pay the collection agency – Debt is sometimes sold to a collection agency. If this is the case, you can pay the collection account. Make sure that it's listed as a “paid collection” on your credit reports once you take care of it.
  3. Settle the debt – A more challenging route is to try and negotiate a settlement with the lender or collection agency so that they accept a lower amount than the account balance. If you do this and are successful, make sure the charge-off is listed as a “settled charge-off.”

Not Sure if You Can Get a Car Loan? Let Us Help

A charge-off or two isn’t the end of the world, but it can impact your credit score and your chances of getting approved for a car loan. If you work with the right lender, though, you could get approved for that loan you’ve been looking for.

Here at CarsDirect, we work with a nationwide network of dealerships that have the lending resources available to handle unique credit situations. Just fill out our free auto loan request form, and we’ll get right to work connecting you to a local dealer.

Free Credit Score

Get your free credit score now! Get a copy of your most recent credit score.

Get Your Free Score

Auto Insurance

Get competitive quotes on insurance in your area.

Sell Your Car

We will buy any car, running or not, with or (in most cases) without the title.

Get My Price

Need a Car Loan?

It only takes a minute.

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.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Terms of Use|Cookie Policy|Disclaimer
COPYRIGHT 1999-2019 MH Sub I, LLC dba CarsDirect.com