Spooky, Scary Credit Situations for Car Loans

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - October 29, 2020

Bad credit can be scary, and it's even spookier if you don’t know how to get out of it. We cover some situations that you should avoid to the best of your ability, and how a bad credit auto loan could repair your credit.

Credit Toil and Credit Trouble

Having bad credit isn't rare. In fact, Experian estimates that around 30% of Americans have bad credit. A low credit score can be caused by an array of troubles such as:

  • Habitual bad credit – Habitual bad credit simply means that you have a history of poor credit, such as multiple late or missed payments, not caused by an event outside your control.
  • Situational bad credit – Borrowers with situational bad credit have experienced a life event outside of their control that caused ruin for a previously good credit score. Job loss, unavoidable medical expenses, or unexpected death in the family, for example, can cause some missed or late payments that soured formerly good credit.
  • No credit – If you have never taken on credit, such as a credit card or car loan, it can cause a lower credit score. To build credit, you need to take on credit.
  • A past repossession – A past repossession on your credit reports usually means a lower credit score. If the repo is less than a year old, it can make getting approved for an auto loan difficult.
  • A past bankruptcy – Bankruptcy tends to leave you with a lower credit score, and you can run into trouble finding the right lender in this situation.

If your credit isn’t the best, it can spell trouble when you need a car loan. Many traditional auto lenders prefer borrowers with good credit scores. Additionally, taking on a car loan with poor credit can often mean qualifying for higher interest rates. In many of these bad credit situations, staying on top of finances can be easier said than done.

However, there's good news – the curse of bad credit is breakable! And one of the ingredients is an auto loan.

Breaking the Bad Credit Curse

One of the easiest ways to stay out of bad credit is by paying your bills on time. Payment history has the biggest impact on your credit score. If you stay on top of all your bills and loan payments, you can avoid:

  • Late or missed payments
  • Defaults
  • Accounts being placed in collections
  • Repossessions

If you're already cursing your bad credit situation, know that it's possible to get out of it by repairing your credit. Improving your credit score is possible because almost all diabolical damage on your credit reports falls off after seven years.

On top of paying all your bills on time, don’t overextend yourself with revolving credit: credit cards. If your credit cards are usually maxed out (or close to it), it lowers your credit score. Make sure that you’re paying the minimum amount each month on your credit cards on time, and that you’re working to lower that balance to at least 30% of the spending limit. Any higher than 30%, and it really starts to hurt your credit score.

Another important aspect of credit repair is choosing a lender that reports your next car loan. Remember that you have to give your credit reports time to heal and take on credit to establish a good credit history. Timely payments that aren’t reported don’t do anything to help your credit score, so simply ask your next lender about their reporting practices.

You can also look for bad credit lending resources that assist bad credit borrowers to increase your auto loan approval odds.

What Can Subprime Auto Loans Brew for You?

To build credit, you’ve got to get approved for credit and manage it well. This can be hard if your credit is poor and you’re applying with traditional car lenders. Traditional lenders from banks, credit unions, or the captive lenders of automakers tend to have higher credit score requirements.

However, subprime financing, or bad credit financing, is for borrowers in tough credit situations, and the lenders that offer it usually report the credit bureaus.

Subprime lenders are third-party lenders that are signed up with special finance dealerships, and they examine more than just your income and credit score. They usually ask about your work history, residency, credit reports, and require a down payment. For a subprime lender, stability and ability are the biggest factors that determine your eligibility for a car loan.

Your stability and ability in your living and work situations can show a lender whether or not you're prepared to take on an auto loan. With all else being equal, the longer you’ve lived in the same area and held the same job, the better your chances of qualifying for subprime financing.

These loans are sometimes called second chance car loans because they give you another chance at getting approved for an auto loan despite a lower credit score.

Time to Lift Your Spirits!

Now that you know the situations that can curse you with bad credit, you can lift the curse. While we’ve already mentioned that nearly every negative mark gets removed from your credit reports after seven years, it’s important to take on new credit that has the potential to improve your credit score, and it helps to work with lenders that can tailor a car loan to your unique situation.

Finding the right lender can be tricky, but we have a treat for you. Here at CarsDirect, we’ve created a network of dealers that spans the country, and we match borrowers to the dealerships who’re signed up with bad credit auto lenders.

To get connected to a dealer in your local area, fill out our car loan request form. Our form is secure, completely free, and there’s never an obligation to buy anything. Get started now!


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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