Okay, you have bad credit, but it’s not the end of the world. The impacts of the recent economic crisis in the United States continue to affect millions of American consumers. The impacts of home foreclosures, late credit card payments and loan defaults can linger for as long as 7 years. While recent analysis shows that the credit scores in America have risen since 2010, the average credit score is still only 695 according to ValuePenguin. However, even though average credit scores have risen, more than a third of us (34.2 percent) find ourselves with subprime credit scores (300-619).
For most Americans, especially those with few public transportation options, ownership of a car is the key to maintaining gainful employment and supporting their family. A poor credit rating, unfortunately, can make it particularly difficult to purchase and/or finance a vehicle. Even if you have taken steps to reduce your debt, pay your bills on time and are up-to-date on your current mortgage, traditional lending institutions may not see you as a valuable customer. Fortunately, there are thousands of used car dealers across the country willing to work with consumers who find themselves in this unfortunate situation.
Throughout the economic crisis “Buy-Here, Pay-Here” dealerships have served an important role in helping millions of consumers get back on the road. These dealers are willing to extend credit to purchasers of automobiles with less than ideal credit scores or history. They provide a valuable option for those of us who are unable to meet the credit standards of banks or other lending institutions.
These dealerships provide independent, one-stop shopping for both vehicles and auto loans. Indeed, the key here is that it’s the actual dealerships financing the vehicles, and they are able to take into consideration a shopper’s recent behavior. For example, many of these dealerships require proof of ongoing and regular employment, which can be one of the most significant considerations for their willingness to finance a vehicle.
Buying a vehicle through a dealership can also help consumers rebuild their credit history. Prompt and consistent repayment of your loan can have a positive impact on your credit score. As always, however, you’re going to want to make sure you find a car that meets your basic needs at a price that fits in your overall budget. You’ll want to be prepared to make a down payment with which you are comfortable, and make sure your monthly payments are manageable.
If you suspect that your credit score could have been negatively impacted by some past events a good first step is to order a copy of your credit report. The federal government required the major credit bureaus to provide consumers with free annual access to their credit reports. You can access yours by visiting www.annualcreditreport.com. Review the reports for any inaccuracies and correct them immediately.
If you have a borderline credit score, those corrections may be just what you need to get a better interest rate on a vehicle loan.
One reality of having a lower credit score is that your loan will probably have a higher interest rate and larger down payment requirements. Make sure you consider this as you set your budget. Most buy-here, pay-here dealers have specialists on staff to help you set practical expectations for both the type of vehicle that makes sense for you and the payment options that work within your budget. Your dealer has a vested interest in seeing you successfully repay your vehicle loan and will work with you to make sure that happens.
As you’re exploring your options you may want to consider having a cosigner. If you’re in this position, consider getting a family member or a close to friend to cosign your loan. Just remember that if you don’t make your payments on time, all the time, you will negatively affect your cosigner’s credit. Don’t lose a friend or make your family upset over a car loan.
Once you’ve worked on your credit score and figured out your budget, shop around to find both a dealership and a vehicle you think is right for you. Many buy-here, pay-here dealerships are CARFAX Advantage Dealers. Every vehicle they sell comes with a free CARFAX Report. As always, in addition to seeing the Vehicle History Report, we highly recommend you see the results of a mechanics inspection before you purchase any vehicle.
Over the past few years, the National Alliance of Buy Here, Pay Here Dealers (NABD) has been working with their members to make sure they’re better meeting the needs of their customers. Their members are committed to giving consumers transparent information about the vehicles they’re selling, they’re loan requirements, and payment options. For the millions of Americans who have found themselves the victims of the economic downturn, Buy Here Pay Here dealers across the country provide a valuable resource helping them repair their credit and get the vehicles they need for a successful life.