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Can You Buy a Car with Bad Credit?

How can bad credit affect getting an auto loan? We help explain how to get a loan, plus the pros and cons of buying a car when you have poor credit.

Can You Buy a Car with Bad Credit?


Shopping for a new vehicle can go from exciting to discouraging quickly if you have poor credit. You may find yourself wondering if it’s even possible to buy a car without a good credit score. The answer is, it is still possible to get an auto loan when you have bad credit, but it might just take a little more work and may cost you more.

Find Out Your Credit Score

Car buying is a serious commitment, one that can have long-lasting impacts on your credit rating. Before making your big purchase or even applying for your loan, you should first check your credit report. According to Experian, credit tiers for FICO and VantageScore credit scoring models differ slightly, but you can generally expect to pay much higher interest rates if your credit score is below the mid-600s. Compounded over years, higher interest rates result in thousands of extra dollars throughout the term of your loan.

If your score is lower than you expect, there are a number of steps you can take to raise your credit score. If you are able to hold off on buying a new car and spend time improving your credit, you will find it is worth it in the long run. Consider these tips:

  • Improve your credit score by cutting back your debt-to-income ratio or reducing your credit utilization. 
  • If you lack credit history, open a credit card and make your payments on-time.
  • Save up for a down payment. By investing the time and effort into saving for a larger down payment, you can qualify for a lower interest rate.

Check Your Budget

If you are unable or unwilling to wait before applying for an auto loan, calculate how much car you can actually afford, including the down payment and monthly payments. A helpful tool to do this is TDECU’s auto loan calculator. Once you know what you can afford, consider compromising on the car you have in mind and purchasing a lower-priced vehicle or a used car. If you are tempted to extend the length of the loan to lower monthly payments, keep in mind a longer auto loan term (six or seven years) can result in paying more in interest.

Don’t Accept Your First Offer

If you have bad credit, plan to compare your options. It can be tempting to go with the first lender who offers you a loan. You can avoid hidden fees, high service costs, and even higher interest rates, if you shop with different lenders to compare loan terms and rates. If you have bad credit and wondering where to start when shopping for a loan, try starting with your own bank or credit union. TDECU offers a wide range of financing options to make the auto loan process easier and more affordable.

Car dealerships may also be able to find a lender to approve you, and some even having special financing services for customers with bad credit. And, there is another option specifically for car buyers with poor credit scores called “buy here, pay here dealerships.” But, there are downsides to the loan offers available with this option, such as very high-interest rates and expensive down payments.

What To Do If You Cannot Get A Loan Approval

Although there are options available to buy a car with poor credit, you may still find yourself unable to get approved for a loan. In this case, you still have a few options. One is to get a co-signer. Consider asking a family member or friend with good credit to be your co-signer and have them agree to make the payments if you are unable to. Co-signers can provide a better chance of getting approved for a loan or getting better loan terms. Be mindful, if you fail to make payments or make late payments, you put your co-signer’s credit score at risk—probably the health of your relationship, too.

If you cannot find a co-signer and cannot delay purchasing a car, you may end up with a high-rate loan. While it is not ideal to be paying high monthly premiums, you can focus on making your loan payments on time, and consider refinancing your loan once you build up your credit and your score improves.

While the prospect of purchasing a new or used vehicle is exciting—and sometimes necessary regardless of your financial situation—when possible, it is wise to spend the time improving your credit before going car shopping. When you are ready to start the process of finding the right auto loan for you, or need help from an expert to make your decision, TDECU is here to help.

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