Bad Credit Car Deals

car deals - credit scoreMany people suffered credit problems during the recent recession and subsequently found it difficult, if not impossible, to get car loans and leases.

That is changing — for the better.

Financial companies that are associated with car dealers and manufacturers, such as Honda Finance, Toyota Finance, and Ford Credit, are now easing credit requirements that have been tight since 2009. They are providing loans and leases to credit-challenged people who couldn’t qualify even as recently as a year ago.

One thing that has changed, and improved, is the way in which auto finance lenders look at potential borrowers. In the past, a bad credit score was a bad credit score — and that was it.

Now, they take a closer look at why and how the customer came to have poor credit. If a customer’s credit issues were caused by a single incidence such as a foreclosure on a home caused by job loss, or unpaid hospital bills caused by an unfortunate accident., the customer has a much better chance now of being approved and getting a good interest rate.

It also helps if a customer has had previous car loans or leases and has always made payments on time with no defaults or repossessions. Car dealers and finance companies have access to special auto-specific credit scores that can take priority over other credit factors.

However, if the customer has a history of late payments, missed payments, defaulted loans, foreclosures, and repossessions; those customers are still going to have difficulty getting approved for loans even in a more relaxed loan market.

If you have poor credit, for any reason, you should expect your car loan (or lease) approval process to be longer than for someone with better credit. One reason is that main-line finance companies such as Ford Credit and Honda Finance, actually do not provide “sub-prime” loans — loans for people with poor credit. They pass those applications off to a sub-prime lender, such as American Credit Acceptance, that specializes in such financing. With all the paper-passing and increased scrutiny of application details, approval can take as much as 4-8 weeks. In fact, a dealer may have to try multiple finance companies before he finds one that will approve.

If you suspect you have credit issues that might result in rejection of your loan or lease application, you should not take delivery of your vehicle from the dealer, even if the dealer tries to convince you it’s OK. Wait until you get final approval. Otherwise you are exposed to having to return your car weeks after you signed papers, or having to make a higher down payment, or pay a higher interest rate than you originally signed for.

Car buyers should always know their most recent credit score before applying for a loan or lease. Otherwise you may be surprised and confused by what might happen during the approval process. If you don’t know your current credit score and rating, you should get it before looking for financing. What’s your FICO score? Find out now when you check your credit report for $1 at Experian.com! Remember, poor credit scores will not allow customers to qualify for many of the car deal incentives that we discuss on this web site.

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