Buying a car without knowing your credit score, sometimes called a FICO score, is a lot like going on vacation to a place you’ve never been before and not bringing along a road map. Just as the road map tells you where you are going and how to get there, your credit score can tell you how to buy a car and, in many cases, where to buy a car.
A credit score can tell you how and where to buy. If you have a credit score above 640, you can probably buy a car in the usual way with conventional financing at any car dealership. If you have a credit score below 640, there’s a good chance that you probably will need to look at a bad credit car loan. Because the sub prime buying process is very different from conventional financing, you should do some additional research before deciding on how to proceed with your purchase.
The first thing to consider in the bad credit car loan finance process is where you’ll get financed. Many dealers that advertise “guaranteed credit” are, in reality, “buy here pay here” or “tote the note” dealers. As long as you’re employed full time, most of these dealers will finance you. The downside to this kind of loan is that most of the vehicles they sell are older cars with fairly high miles – not what you would call “dependable transportation.” The other drawback is that these dealers rarely report your positive payment history to the credit bureaus, which means that even if you make every payment on time and pay off the car, it will never be reflected on your credit report. The next time you apply for a loan at a bank or credit union, this credit line won’t show up and if they turned you down before, they’ll probably turn you down again.
On the other hand, if you’ve had a recent repossession, are currently in a bankruptcy or have no credit history and no co-signer, this may be the only way that you can get a bad credit car loan.
