It’s a common story: You want to buy a car, the perfect car for you, but like many of us you do not have the cash. You need to apply for and be approved for a car loan. You have a job, the price right, the payments would be right. But when you apply for the loan, surprise, you do not get it. You did not know you have less then perfect credit. You are told you are “subprime.” Persona non gratia , you have too low a credit score, typically a score below 620.
Determining Why Your Score is Low
There was a time these scores were kept secret and only seen by the lending institutions, but now you can find out your credit score through various sites Trans Union, Experian and Equifax, each of which make your score available online (for a price, of course. If you find an error you need to fix it, you’re lucky – you may be able to quickly boost your score. Otherwise, it may take a few years to boost your score. Of course, one of the most powerful score-boosters is the repayment of an installment loan.
The Consequences of a Subprime Credit When Financing a Car
Just because you were turned down does not mean you can not get a loan. You can often get a loan, but the interest rate will be higher and may make the monthly payment unaffordable, not to mention the required down payment. If you look disappointed the lenders may not budge.
Utilizing Alternatives Modes of Financing
Very often in commercials the car dealership guarantees you will be approved. What you do not realize is the dealership is in partnership with the loan provider, so the dealership will get a percentage for any applicant that gets funded through one of their lenders. Instead, you can check various lending institutions before you buy that vehicle. Your personal bank is a place you should first check especially if you have been a long term customer. Some banks have departments strictly dealing with bad credit customers. Many credit unions are now open to the public and may provide a loan. The old adage you never know unless you try is very applicable here. You are the one who decides if the interest rate is what you want to pay. Get the offers in writing and make sure they are fixed rate, not variable. The prime rate may affect the lender’s rates.
Building Your Credit Score Over Time
You can improve your credit rating over the years by paying your bills on time. Do not overspend or owe more then you can afford to pay off keep those credit cards in control. Keep track of your credit by checking once a year. You can see what you need to improve it will not improve overnight unless the problem was all errors. Errors will still take time to resolve. Patience and budget control will improve the score eventually. In the mean time your old car or public transportation may have to do.