Bad Credit Car Finance
Credit can be a complex topic to talk about. While everyone knows someone with bad credit, it often goes unnoticed. If you’ve had issues managing your finances in the past, you may have less than perfect credit.
If you have a poor history of managing your money, that can have long-lasting consequences on your credit history.
Bad credit can make it challenging to get a car loan. Fortunately, there are ways to improve your credit and get a car loan with bad credit. Keep reading to learn more about how to get a car loan with bad credit and other financing options that may be available to you.
No one wants to be in a tight financial situation. It can be an uncomfortable place for anyone to be, and even more so for people who have worked hard at being responsible with their money. At this point, it’s easy to give up and feel like you have no options left. The truth is, there are options for people who have poor credit scores. In fact, if you’re careful about selecting the right loan and lender, you can get low-interest rates on car loans with bad credit from lenders who specialize in them!
What is a bad credit score?
Several factors can negatively impact your credit score and cause it to fall into the bad’ range. A car loan on bad credit would also come with a higher interest rate than a loan on good or excellent credit. Bad credit is based on several factors, which include:
1.) Credit history: This includes how long your accounts have been open and how much of your outstanding balance has been paid overtime. Your payment history makes up 35 percent of your final credit score. Other factors include having personal loans that are not in collections but are overdue by 90 days or more (30 percent), having collections accounts that have been paid but are at least 180 days old (15 percent), and the number of recent credit inquiries or new accounts you have opened over the past two years (10 percent).
2.) Credit utilization: This refers to the amount of available credit you have used compared to your overall line of credit. For example, if you have a $1,000 credit limit and use $5,000 of it, your utilization rate would be 50 percent. This negative factor makes up 30 percent of your total score.
3.) New credit: This refers to how many new lines of credit you have opened in the past 2 years. The less new’ credit you have, the better. Your score will drop by 5-10 points for each new account or piece of new credit you open.