HOW TO BUY A CAR WITH BAD CREDIT. CAR BUYING TIPS

HOW TO BUY A CAR WITH BAD CREDIT. CAR BUYING TIPS

34% of Americans fall into the category of bad or fair credit, and in our experience, you guys are the ones who come into the dealership the most unprepared. In this article, we’re going to share with you how to buy a car if you fall into that bad or fair credit. If you have less than a 670 FICO score, this article is definitely for you. If you've never bought a car on credit before, this article is definitely for you. Reading this entire article going to ensure that you get the best interest rate, the best vehicle that meets all your wants and needs, and the dealership will not be able to scam you.

There's a lot of bad information on the Internet when it comes to FICO scores and there couldn't be one company that gives you the worst information and that's credit Karma. Credit Karma is not the place to go to in order to get your FICO score. Fico score is made by one person and it's fair Isaac's company. That's why it's called FICO. Now there are a lot of versions of FICO. Your bank uses a different version. Auto lenders use different versions, mortgages use different versions, and so on and so forth. Typically speaking, when it comes to auto, we're using FICO Score 8 version. And then to throw a little bit more into it, we're using what's called auto enhance. Yes, they're giving you kind of like a grading on the curve back in school. They're giving you a curve score based off of your previous automotive history. Your auto enhanced biking score can start all the way up to 900 and it goes all the way down to 250. And, unfortunately, you're not going to find much information on the Internet about that topic.

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So, here are the six things that you need to do in order to get approved for your next or first car loan:

1) Make sure that you come in to the buying process with an open mind. Now, we have to do our homework before we go to the dealership. But once you get to the dealership, you have got to have an open mind. You've got to remember the three most important things that we're going to do with our next car purchase. Get good, reliable and dependable transportation. Get something that is affordable in your monthly budget and, most importantly, get a vehicle that's going to lead you to a better credit score.

2) You've got to have equity. Equity is very important in a car deal. Go away from a “buy here, pay here” situation. Having an equity makes banks blind to your credit score. They like to see that you have some interest and some involvement in the auto loan. They know and understand that a $500.00 or a $1000 down is a “downpayment”. When you do two, three, five or more thousand down that becomes an investment in the bank's mind. They know based off of their recovery rates that if you have more money down the less likelihood that they're going to have when it comes to a repossession. Money down can come in a couple of different ways. The most common way is actual physical cash down and secondly trade equity.

Now we’re going to tell you something on trade equity that probably nobody else out there is telling you. Most times that you have a trade and you owe money on that car - you have no positive equity. Instead, you have negative equity. So, if you have negative equity or you owe more than what your car is worth, there's most likely that you got to have from 10% to 20% to 30% down, plus the negative equity to get financed.

The best equity to have are 20% and 30% down. Sometimes you can get by with just 10% and every bank varies. Sometimes they go off of NADA trade in, sometimes they go off of NADA retail. But you need to have at least 20% down to get favorable financing.

3) Have all your documents ready. A lot of times banks will tell dealerships that you need to show some “proofs”. That means we need to prove income. We need to prove where you live, we need to prove your insurance and a vast other document that they want us to get for this auto loan. Make sure you have your check stubs, your W-2 forms, your 1099 forms, your bank statements. Have access to all those when you go to the dealership.

4) Don't shop your credit around or go dealer to dealer. There's sometimes almost no advantage to you to do this, with the exception of getting a lot of inquiries on your credit report. Inquiries don't hurt your credit score much or at all. But, obviously, there's no reason to waste all of your time because there's so many variables when it comes to getting your car loan approved with less than 670 credit score. It doesn’t mean that you can't let the dealership submit your credit information to several banks so that way you get the best terms, but there's really no advantage for you to go dealer to dealer and let them run your credit over and over again. Which leads us into the next stage.

This is very important for you, in order to get a good deal on your next car with less than the 670 credit score and it might be positioned even before the Stage 1.

5) You've got to do your “homework” before you contacted dealership. You need to contact a dealership that has someone from finance department. A lot of dealerships have special finance managers or salespeople who deal with a lot of subprime or special finance customers. Those are the perfect people to work at the dealership. Definitely walk in or call and say: “Hey, do you guys have a special finance manager?”. Everybody there is going to know what you're asking about and referring to, so it should be a really quick answer.

And most importantly, if the dealership does not have their pricing on their website – DO NOT use them! It might be even worse than a «Buy here, Pay here». Dealership that has no pricing on their website are the biggest scam artists in the industry.

Again, you can come over to the dealership if it has a special finance manager or has someone who dedicates themselves in special finance. Most of the time, this is going to be a franchise dealer like Chevrolet, Ford, Toyota, Honda, etc. Those are the best dealerships out there to get you approved if you have less than 670 credit score.

6) When you go to a dealership make sure your driver's license has correct name and address on it. Make sure your paycheck stubs have correct address on them. Make sure everything you have has up-to-date information on it. That’s is needed because the worst thing that can happen and the deal will get kicked back from the bank after you leave and it's going to create an amazing and negative response from the bank is you having the wrong information on your driver's license, ID card, insurance, etc.

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