Your Car Loan Could Benefit from Credit Repair

Get Car Financing
Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - February 17, 2020

When it comes to car loans, the better your credit score, the better your loan rates and terms typically are. When you have credit challenges, it can seem impossible to get the deal you're looking for in a vehicle. Sure, there are plenty of bad credit auto loans available, but if you're looking for a better deal than that, you should try to improve your credit first.

How Credit Affects Car Loans

Your credit not only affects whether or not you're eligible for a car loan, it changes the kind of deal you can get on that loan. If you have good credit, there usually isn't a question of getting a loan, but rather what kind of loan terms and interest rates you are available to you. In other words, it's about finding where to get the best deal on an auto loan.

Bad credit borrowers don't often have that luxury, in part because there are fewer lenders offering car loans to people with credit issues. These lenders, called subprime lenders, only work through special finance dealerships. Because these lenders aren't found at every dealer, there isn't always an option for borrowers with poor credit.

Additionally, when you have poor credit, you're required to meet additional qualifications in order to be considered. These factors help lenders look beyond your credit score to get a full picture of your situation. However, if you don't meet all the qualifications, you're likely to have trouble getting approved.

Simple Repairs for Your Credit before a Car Loan

If you're worried about not getting the best rates and terms for your next auto loan, use these simple tips to help improve your credit score before you apply for a bad credit car loan:

  • Pay your bills on time – Your payment history is one of the biggest factors that contributes to your credit score. When you pay bills on time, you build positive account histories on your credit reports, which looks good to lenders.
  • Become an authorized user – Being an authorized user on someone else's credit card is a great way to build credit. You get the benefits of having that line of credit on your credit reports, such as its positive payment history and length of credit history.
  • Lower your credit card debt – Your amounts owed, which has a lot to do with your credit utilization, is the second largest factor in making up your credit score. Credit utilization tells a lender how much of your available credit is being used. It's said that your utilization starts to negatively affect your credit score if it's above 30%. To find your credit utilization ratio, simply add up the outstanding balances of all your credit cards, and divide that number by the sum of all of your credit limits. If it's over 30%, try to pay down your balances to lower your ratio. Don't close out long-time credit cards, however. A long payment history helps your credit.

Bad Credit Car Loans Build Credit, Too

You may not want to get a bad credit car loan with a high interest rate, but if you can't wait to get a vehicle, you may have to. However, if you make your payments on time and keep your loan in good standing, an auto loan is an excellent way to build your credit. Once you're able to improve your credit score enough, you may be able to refinance at a lower interest rate, or trade in your car for a newer one with a better loan.

If this sounds like the option you need to take, let CarsDirect help. We work with a large network of special finance dealerships that have lenders available to help those with imperfect credit. Fill out our fast and free auto loan request form, and we'll begin the process of matching you with a dealer near you!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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