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If you’re looking to buy a car but your credit isn’t quite where you want it to be, there’s hope at the end of the tunnel! By taking some proactive steps, you can improve your score and find a reliable ride.
Your credit can be affected by things like missed payments, high debt or a past bankruptcy. And while a low credit score may make it harder to get a loan, it doesn’t mean you can’t find a good vehicle – or that you can’t start making small changes today to improve your interest rates down the road. There are simple steps you can take to get back on track and have a successful shopping experience.
5 Tips to Consider:
Boost your score
If you haven’t yet, check your credit score for free with services like Credit Karma, Experian or Credit Sesame. If your score could use some improvement (if it’s idling somewhere between 300 and 579), you might be at risk of paying nearly double in interest than someone with a higher score. Make sure there aren’t any errors in your credit report, and try making these basic lifestyle changes:
The sooner you take these steps, the faster your credit score will improve – and the sooner you can secure financing and hit the open road.
Avoid late fees by setting up automatic payments in online bill pay. And when paying off credit cards or loans, focus on the debt with the highest interest first. This can save you in the long run, freeing up more money for your car purchase.
Save for a down payment
Speaking of putting more money toward your car, once you have an idea of how much you can afford, aim to save enough for at least a 20% down payment. This lowers the loan amount and can make it easier to get approved when it comes time for financing.
A larger down payment shows lenders you’re serious about repaying the loan, and it can lead to lower monthly payments. Consistently making those payments can help rebuild your credit over time, too.
Get pre-approved for a loan
Getting pre-approved shows you how much a bank is willing to lend. It also gives you confidence when negotiating at the dealership.
Many dealerships offer subprime or guaranteed-approval loans, but at high interest rates. Check with a personal lender to discuss different options and see if you can get pre-approved for a lower rate. (By setting up automatic payments with a Gate City Bank checking account, you could score a 1% discount!)
Consider a cosigner
If you have someone you trust with good credit, think about asking them to be a cosigner for the loan. This could help you get approved and may lower your interest rate. But if you miss payments or don’t repay the loan, your cosigner will be responsible, which can hurt their credit score.
Cruise around for special programs
Some dealerships offer credit-rebuilding programs that report to credit bureaus. By making regular, on-time payments, you can improve your credit.
Lease-to-own programs are another option. They let you rent a car with the option to buy it later. The payments may be higher, but you can rebuild your credit while you drive.
Additionally, some car makers offer “second chance” or “special financing” programs with lower rates or better terms. These deals are often temporary or for specific cars, so it’s a good idea to check for promotions.
Buying a car with less-than-perfect credit is possible with some planning and patience. By working on your credit score, saving for a bigger down payment and checking financing options, you can get a reliable vehicle and improve your credit over time.
We’re here to help along the way! Connect with a personal lender today to learn more about how you can best pursue an auto loan.
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