How Do I Deal With Credit Problems And Financing Used Cars

If you have credit problems and are trying to figure out to go about the process of financing used cars, then you already know it can be frustrating and difficult to get a car loan. The good news is that it is possible to get credit even if you have bad credit. However, it takes a lot of research on your part and extra work; and then the terms usually aren't that favorable. The bad news is you may have to agree to these terms right now to get your credit re-established. Once you get your credit fixed and back on track you can apply for a new loan with better terms and interest.

If your credit score is between 580 and 620, your poor credit will affect your car loan. These numbers are below the prime, so new lenders are going to charge you a premium because you are a high risk loan. You could pay up to 5 percent over the going interest rate. When your score is below 620 you are labeled in the subprime category and the majority of lenders will decline your application.

Before you go out looking for a car loan check your credit score so you know what you are dealing with. You can go to AnnualCreditReport.com and get a free credit report once a year, from Equifax, Experian and TransUnion records. Make sure you check for wrong dates, payments, balances and any other errors that need to be corrected. According to the Federal Trade Commission (FTC) the credit bureaus are required to respond to any disputes and take off any errors they can't confirm within 30 days of your first contact with them. When you get negative information removed, your credit score goes up.

If you have an overpriced high-interest car loan today, it doesn't mean you are stuck with it for the term of the loan. Once you remove your credit problems, you can always go to a different lender for better rates and terms. Always pay your car loan on time and all your other monthly payments when they are due. This helps your credit history and pays your balances down at the same time.

You may want to consider a co-signer to help you get financing, if you can't qualify on your own. Consider this option as a last resort and carefully look at the consequences, because your co-signer accepts all responsibility for your loan if you default. If you default you will not only destroy your own credit, but you could also destroy your co-signers credit as well.

The co-signed loan will help repair your damaged credit history if you make your monthly payments on or before the due date, because this history is reported on your account not the co-signers report.