When you begin car shopping, you should realize that the loan you get is dependent upon your credit. Your credit score plays a huge role in the amount you can borrow and the interest rate you will get, which is why it is important to know this before you go car shopping. If you currently have a credit rating that is not as good as it should be, there are still ways to get cars. Here are three tips to help you understand how to get the best car loan with credit that is less than stellar.
Getting Your Credit Report Should Be Your First Step
Before you ever go shopping for a car, you should get an auto credit report so you know what your score is. You should realize that pulling your own credit report will not affect your credit in any way.
When auto dealers pull your report, or enlists a third party like NCC Direct, Inc. to pull a report, it can have a slightly negative effect; however, many people believe that if they shop around for cars and each dealer pulls a report, it may hurt their credit. The truth is that credit bureaus view all similar inquiries as one, as long as they occur within 14 days of each other.
It is important to know what your credit score is when car shopping, because it will help you understand what to expect. If you find out your credit is not very good, you will not be surprised if you have more trouble getting a good loan.
Auto Credit Reports Are Different
You may not realize that credit reports for auto dealers are not generally the same as regular credit reports. They focus primarily on a person's history with car payments, and they also include a credit score. A person that has consistently made his or her car payments will have a higher score than a person that made late payments. If a person has no history of any car payments, the person's credit score may be lower from a lack of history.
Because of this, your credit may not be as bad as you think. If you have a perfect history with making your car payments, your credit with an auto dealer might be better than you expected. If you have a bad history of making your car payments, your score might be lower with the auto dealer's credit report than what you thought it would be.
Shop Around For Loans
With bad credit, it is not impossible to get a car loan. Car dealers often work with a variety of different lenders, and they are usually able to get loans for anyone. You might have a higher interest rate because of your bad credit, but at least you could get a loan. If you want the best loan, you should shop around. As long as you limit your shopping to 14 days, you will not have a problem with your credit getting worse.
As you shop around, you may want to look for dealers that offer financing for anyone. There are plenty of dealers around that offer this, but that does not mean they all offer equal financing. The financing you are offered is highly dependent on the auto credit report the dealer obtains, and there are several companies that offer these. Each one might yield different results, which could be favorable to you in certain situations.
Understanding how your credit affects the ability of getting a car loan and the terms of the loans is good to know before you go car shopping. If you would like to find out more about this, you could apply for a car loan online. The dealership will run your credit, if you give them permission, and this could be your first step in getting a good car loan.