|
 Figuring out which new car to buy can be a very stressful experience. Financing decisions only add to that stress especially if you've got bad credit. Because having a bad credit score can hurt your ability to get a competitive interest rate on a car loan.
Car Loans and Bad Credit
Based on the car loan advertisements you might see or hear about you wouldn't think credit scores made any difference at all - zero percent financing, college graduate rebates, tiny down payments, special financing packages through automobile manufacturers. But what if you had trouble making some of your other monthly loan payments in the past?
The fact of the matter is that bad credit can and will hurt your ability to get a competitive interest rate on a car loan and you might even be denied credit. So what can you do if you think your credit rating is lower than it should be?
In this article we're going to explain exactly what you can do if you think there is a problem with your credit score and how you can try and get your credit report corrected. But first we're going to help you to better understand what a good credit score is and what might be considered a bad credit score.
National Average Credit Scores
If you try to get a car loan from a dealership, local bank or lender one of the first things they will do is check your credit score. Even though there are several credit reporting agencies, most use the same approach to calculating a score and that method is sometimes referred to a FICO score.
If you know your credit score, you can compare that value to a list of published average credit scores. Comparing your score to the average in your area will help you to understand how you rank in your region of the country in terms of being a credit risk.
If you want to make a more detailed comparison, you can look at a table of FICO scores. For example from those tables we can figure out that only 15% of the population has a credit score below 600. With that kind of information you can get a pretty good feel for how good or bad your score is compared to others.
Credit Reports and Car Loans
If you believe you've got bad credit then one of the first things you should do is take a close look at your credit report. In fact, you should do this long before applying for an automobile loan. Your credit report is a history of your payments to others. It contains records of your payment patterns that help to paint a picture of you financial reliability.
You should ask to see a copy of your credit report so that you can correct any errors that might exist in the document. You'll want to make sure that all errors are corrected before you apply for an auto loan. This will give you the best possible chance of getting the most favorable loan terms. If you've got some bad spots on your credit report - enough to make it seem like you are risk to the company considering giving you a car loan - you'll want to start taking some action to help clean up a potentially bad credit rating.
Erasing Bad Credit
There are many marketing claims stating that bad credit can be erased. No matter what the advertisement says, this is simply not true. Many companies try to appeal to consumers with a poor credit history. They usually want to charge a fee to help clean up your credit report so that you can get your auto loan. And while you should always explore all your options, just keep in mind that providing false information when applying for credit is against the law.
Credit Repair the Right Way
Also keep in mind that under the Credit Repair Organizations Act, companies offering credit repair services cannot require payment for services until they have actually completed the advertised service. Under the Fair Credit Reporting Act, you are allowed to question any record in your credit history file and your complaint must be investigated.
Negative information will be removed only if the investigation determines that a mistake has been made. Accurate information cannot be removed from your credit history - only time can heal those problems.
Free Credit Reports
You can get one free copy of your credit report each year if you can prove that you're unemployed and plan to look for a job with 60 days, you're collecting welfare, or your report is inaccurate because of fraud. You can also get a free copy of your credit report if you've been denied credit within the last 60 days. You're also entitled to one free credit report annually from each of the three credit agencies.
Getting a Car Loan
Just because you might have bad credit doesn't mean you won't be able to get an auto loan. Lenders have their own credit standards and not all of them will look at your credit history the same way. Some may focus on more recent years to evaluate your risk level for a loan, and they may grant you a loan if your bill payment history has improved. It may be worthwhile to contact lenders informally to discuss their credit standards.
If you need additional help, you can always contact a credit counseling service. Counselors try to arrange payment plans that are realistic to you and acceptable to your creditors. You might also want to take a look at our article on credit card debt elimination, which discusses alternatives such as debt consolidation and budgeting. All of these tactics can help you make your monthly debt payments on time and that is really the best way to improve your score.
Fixing a Credit Report
Finally, if you get a copy of your credit report and you find an error, it's a good idea to get that error corrected before applying for a car loan. Under the Fair Credit and Reporting Act all credit agencies are responsible for correcting inaccurate credit reports. If you're interested in more information on the exact steps to take to correct a credit report as well as the contact information for all three of the major credit rating agencies, then take a look at our article on the Fair Credit Reporting Act.
About the Author - Bad Credit Auto Loan
Copyright © 2004 - 2007 Money-Zine.com
|
Home 
