Most people can’t afford to pay cash for a new car because the prices have got so far out of hand. Maybe if you didn’t need to drive for three or four years you could put a monthly payment away in a savings account and then have the money but this isn’t practical. Most people need transportation to get to a job so they can make money to spend on a car, it is a viscous circle.
If you are having trouble getting car financing with bad credit then the first place to look is your credit score. This number, also called the FICO score for the Fair Isaac Company, the first ones to develop this algorithm, is a three digit number that is based on scorings from five areas of your credit history. If your score is above about 630 then you shouldn’t have a lot of problems with your credit. If it is below 600 then you will find getting a loan much more difficult. The average FICO score in the US is about 670 at this time. If you can get your score to that number then you will be golden.
Getting a good credit score is really about having credit, whether bank loans, credit cards, or revolving credit, and then making the payments on time. The score is calculated on several factors including how much credit you currently have, how long you have had a credit history, and whether or not you pay your bills on time. If you have never had a loan before then the rating agencies have no credit history for you and they don’t know whether you will pay back the loan or not.
One of the best methods to improving your score if you have no record is to get a small bank loan and make payments for a little over 6 months and then pay the loan off. This takes some determination on your part because you need to start changing from an attitude of spending every dime you have (and then some) to a belief in having some money in the bank. What I suggest is to get a loan and then put the money in a savings account and use that account to pay back the loan. This way you are sure to have the money for the payment each month.
Car finance with bad credit is almost impossible in the current credit environment so it is worth your while to improve your rating.
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