Low Credit Score issues when purchasing a car or truck
August 15, 2011 // 0 CommentsIf you have no credit or a low credit score, you may feel as if there is no way for you to purchase a vehicle. However, you can purchase a vehicle with bad credit or even no credit. The first place to start is knowing your credit score. Many times I have found that my customers have better credit than they expected.
Usually, when a customer has had a repossession or a bankruptcy in the past, they feel as if there is no hope for them ever again. However, after such an event your score has basically nowhere to go except up. If you have recently been paying your bills on time and reducing your total debt, then your credit score is on the rise and it can recover faster than many people realize.
Sometimes debt settlement, for instance, can have a positive impact on a person’s credit. It would seem to be the opposite because in debt settlement you pay off your debt for a fraction of the amount of the loan. Inherently a settlement hurts your credit score. However, when a customer settles their debts, the debt to income ratio improves. Debt to income ratio comprises nearly one-third of a person’s credit score. This is how a settlement can have a positive impact on a person’s credit.
But let’s imagine that your credit is truly as bad as you think it is. In this case you will still be able to purchase a car—even if you have no credit. You might be turned down at a large new car dealership but there are smaller used car dealerships that will be able to get you approved on a vehicle. I happen to work at such a dealership. In a dealership such as mine your job is essentially your credit. You will fill out an application that is somewhat similar to one you would fill out at a big name dealership but the criteria is a little different.
To get approved at a small used car lot you simply need to bring proof of residence, proof of income and a state identification card like a driver’s license. Basically anyone with a job and somewhat of a down payment can drive away in a vehicle. The bank programs prefer a down payment that is 33 percent of the sale price on the vehicle. Car lots such as mine can get approval for a car loan with as little as five hundred dollars down at times, though as a rule one thousand is the minimum down payment required upfront to obtain a vehicle.
As a rule of thumb, you will need one thousand dollars down to buy a small economical car. You will need 2000 dollars down to buy a large car or small truck, and you will need around 3000 dollars down to purchase a premium car or sport utility vehicle. Remember at such a car lot, your cash is your credit.
This is a way that you can obtain a car with little money down if you need to purchase a vehicle right away. If you can wait, of course the best way to purchase a vehicle with little or no credit is to simply pay cash. A good practice is to start putting away payments of 300 dollars to yourself every month. In four to ten months you will have saved enough money for a down payment on the car you want and you will have already trained yourself to make the monthly payment. In summary, where there is a will, there is always a way to obtain a vehicle.
If you are unsure about whether you qualify for a loan, or have had problems with dealerships not being able to sell you a vehicle, give our local partner, Smartway Advisors a call. While the are currently only able to help those who live in the Pacific Northwest they may be able to help you if that’s where you live.
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