My credit score is 475. Is it likely I will find an auto loan?
You may be able to purchase a vehicle, but you should expect to pay a premium in interest due to your low credit score. Luckily for people who find themselves in your position, some auto dealers, especially used car dealers, specialize in securing financing for consumers faced with credit problems.
You should be careful when shopping with a used car dealership, as some of these businesses overcharge for their vehicles and sell vehicles that are in poor mechanical condition. If you see a vehicle that you like, you should know the retail cost of the vehicle, which you can find by visiting the Kelly Blue Book website at http://www.kbb.com/. You should also find out whether or not the used vehicle you are interested in purchasing has not been involved in a major accident, suffered flood damage, or been declared a lemon under your state's Lemon Law. You can obtain all of this information by purchasing a $25 used vehicle history report from Carfax (www.carfax.com). I highly encourage that you do this as it is important that you know the history of the vehicle you are planning to purchase. Many dealerships will provide you with a free Carfax report and Blue Book pricing information if you express interest in purchasing one of their used vehicles. If a dealership is unable or unwilling to provide you with Blue Book and Carfax information, you should write down the make, model, mileage, and VIN number of the vehicle and use that information to obtain vehicle value and history information by visiting the websites I mentioned above.
As I mentioned, there are many dealerships, especially used vehicle dealerships, that specialize in financing vehicles to people with credit problems, though you will likely pay a significantly higher interest rate than the 9% to 10% national average. In fact, with your low credit score, you should probably expect to pay 15% or more in annual interest, meaning that you will pay significantly more in interest over the life of your loan than the average consumer. Due to your low credit score, you may want to consider ways to obtain a loan with a lower interest rate, which would save you a lot of money. For example, if you do not need the vehicle immediately, I encourage you to work on improving your credit score for a year or two in an attempt to improve your score before buying a car.
Start by reviewing your credit reports carefully to make sure no inaccurate negative listings are appearing. Credit reports are notoriously inaccurate, and close scrutiny is required on your part to make sure that your credit report is current and accurate. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.
Obtain a free copy of your credit report from each of the three major credit bureaus by visiting AnnualCreditReport.com. Once you have resolved any inaccuracies on your credit report, I encourage you to work to repay any outstanding debts that are negatively affecting your credit score.
Look into obtaining a secured credit card, which is a good way to create a positive item on your credit report. Secured credit cards require you to place a sum of money on deposit with the card provider, which then extends you a credit line equal to the amount of money on deposit. While this concept sound strange -- "Why not just spend the money?" you might ask- but these cards report timely payments to the credit bureaus allowing you to use them as a tool to build your credit.
If you need the vehicle immediately, not allowing you time to rebuild your credit, you may want to have someone with a better credit score, say a parent, spouse, friend or relative, co-sign the auto loan with you. If you can find a co-signor with a good credit score, you should be able to obtain a much better interest rate than you would be able to obtain on your own. Discuss the possibility of a co-signor and how it would affect your interest rate with the dealership.
If you need the vehicle immediately and cannot find a co-signor, you may be forced to purchase a vehicle at a high interest rate. Luckily, your payments on your new auto loan, along with other efforts to rebuild your credit, should improve your credit score in a relatively short period of time. Once your credit score has improved, you may be able to refinance your auto loan at a lower interest rate, which could lower your payments and the total amount you will pay in interest over the life of the loan. You can learn more about auto refinance loans by visiting the Bills.com resource Auto Refinance Loan Advice.
I wish you the best of luck in finding an auto loan that fits your needs. To learn more about purchasing a vehicle, I invite you to visit the Bills.com Auto Loan Information and Savings page. In addition, if you enter your contact information in the Bills.com Savings Center at the top of the page, we can have several pre-screened auto lenders contact you to discuss the options available to you.
I hope this information helps you Find. Learn. Save.