Good credit opens doors in the financial world – including doors to purchasing a new vehicle – but what do you do if your credit is shot and you need a new car? It is possible to buy a new vehicle even if you have bad credit, but you need to do the following to make it work:
Before shopping, check your credit score. It might be better than you think – but it could also be worse. Either way, try not to get too emotional. You want to know what you are dealing with before you walk onto a car lot and ask for financing. You will also want to understand your best financing options, and when your credit is bad, what is offered to you by a car dealer might not be the best option. It is a good idea, if possible, to secure financing before you begin shopping.
Keep in mind the offers made by car dealers to people with bad credit arenot always what they are cracked up to be. Granted, you will get a new car, but the interest you pay on the loan will likely be steep. Make sure you budget for a higher interest rate if you need to finance a new car purchase.
Know the difference between good and bad credit. Poor FICO credit scores are typically 580 or less. Fair ranges from about 580 to 669, good is 670 and to 739, and very good or exceptional is 740 and higher. These numbers are not always exact when it comes to making a purchase, but having an idea of where you are range-wise can make a big difference and help you temper your expectations.
Finally, consider your down payment. The more cash you offer upfront the better off you will be in the long-run. It minimizes the lender’s risk so you are more likely to get a generous loan offer as well.