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Advice on applying for auto loan with bad credit

Mark Cappel
UpdatedOct 8, 2007
Key Takeaways:
  • Expect to pay higher interest on an auto loan, if your credit is bad.
  • Consider working to improve your credit score, if you can put off your car purchase for a while.
  • Look into refinancing your auto loan, if your credit has improved since you financed the vehicle.

Can I get an auto loan with a FICO score of 612?

Can I get an auto loan with a FICO score of 612?

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 (frequently called "buy-here, pay-here" models). However, 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 or overcharge you for the loan (since they know that they have you in a precarious position with limited options).

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. 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; 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 higher interest rate than the 9% to 10% national average. In fact, with your low credit score, you should probably expect to pay 12% to 15% or more in annual interest, meaning that you will pay much more in interest over the life of your loan than the average consumer. 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. You could start by reviewing your credit reports carefully to make sure no inaccurate negative listings are appearing- if you find any, you can dispute them with the credit bureaus as described by the Federal Trade Commission.

You can obtain a free copy of your credit report from each of the three major credit bureaus by visiting

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.

Most times, the best way to improve your credit profile and credit worthiness is by getting debt free! Very quickly, if you want a free debt consultation with one of Bill's approved debt help partners, click here: Debt Help

Then, to rebuild your credit, you can also look into obtaining a revolving credit account, such as a gas card, which is a good way to create a positive item on your credit report. 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 at

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 Auto Loan Information and Savings page.

In addition, if you enter your contact information in the 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 that the information I have provided helps you Find. Learn. Save.



2 Comments, Jan, 2009
Thanks for the great information for consumers looking for an auto loan or auto refinance!
ggodwin, Jan, 2009
Even if you have bad credit or no credit the information featured below will educate you so that you will be able to achieve the lowest new auto loan rates possible! It is common practice for dealers to send your credit information to multiple banks and lenders when looking to assist you secure financing for your new car. Whether or not you achieve approval, as well as the loan amount, interest rates and terms of your auto loan will be determined by your credit history. Therefore, it is good practice for you to obtain a copy of your credit profile prior to applying for a car loan. A quick credit check will help disclose any negative marks as well as influencing errors and/or misinformation on your credit report. Any errors listed will need to be disputed immediately. If information is not up-to-date, you will need to contact your creditors and make sure that they report your current credit history to all three major bureaus.If you have any negative marks on your report, you should research what you can do to improve your credit score.1. Know How Much You Can AffordPart of getting the loan that you want is to make sure it fits your budget. For this reason, you need to calculate how much you can comfortably afford. Only you know just how much this is, and you need to try to stay below this figure when getting your new car. It will not help you to buy a car you really cannot afford to keep or maintain. Remember, when you calculate this figure, you should have an idea about how much car insurance will be, and other expenses such as gas.2. Get Preapproved For An Auto LoanFind a lender by getting several quotes and seeing how much they will lend you. This will save you time, and in many cases money, because it will enable you to start out knowing exactly how much of a loan you have to work with.Once you are approved, the lender will issue you a blank check with a credit limit. All you need to do is find the car you want and fill in the check for the amount of the car. The loan is not actually in force until you sign it. If you don't, then the loan will be cancelled and the check becomes void after a short period.3. Negotiate PriceAfter knowing the price of what a car is worth, you can negotiate for a better price with the car salesman. Typically, you should be able to bring the car down to within a couple of hundred dollars of cost. They do need to make some profit, since this is how they put bread on their table.Also, don't forget that you can reduce your payments more by making a down payment. The larger the down payment, the less you will need to pay each month. It is also true that if you keep the time for repayment as short as possible, it will save you more dollars in interest. Be sure to understand some of the things that the dealer may try to add to your agreement. Some of these may make sense - others are really unnecessary.4. Find A Car You LikeThe next thing is to get an idea of the car you want to buy. You can do this easily by searching online. Then you want to find out how much that same car is selling for elsewhere, as well as looking it up in the Blue Book.Be careful of paying a fee to see the cars at any car dealer. This is just a ploy to get you to give them some money so they can hold you there until you buy from them. You should not have to pay anything to see cars - or even test-drive them.5. Drive AwayThe last step of the deal. This is where you can drive away with a happy smile on your face. Your research has told you that you came away with a good deal - and you are now comfortable with it. While the loan may be a good deal - it is not necessarily the best. For you to save money, though, and get a better deal, simply follow the steps below. The smartest, most important thing to do before you sign that dotted line is to do research. Shop around interest rates with some major banks and online providers. A good idea would be to look for an online auto loan calculator and crunch some numbers (various loan terms, down payments and interest rates) so that you can pre-determine what you can anticipate to pay for your financing.------------------godwin