Don’t take someone else’s word that your credit is bad – check for yourself
■ RICHARD PERRY / Contributed
Recently, my wife and I got a new bedroom set with 0 cash down, and 0 percent interest for 40 months. Fortunately for us, we have excellent credit. And the times we need credit it’s nice to know that we can get the best rate and terms available.
I have a lot of people who call me for credit advice; I know some people have bad credit. However, it doesn’t mean you can’t buy a car and doesn’t automatically mean you can’t get a car loan or have to accept terms that put you in the poor-house.
Like everything else, “bad” is a matter of opinion and degree. If the FICO score is borderline, some lenders might still see a good prospect, while others would see more risk.
While lenders will typically charge higher interest rates to subprime borrowers, you don’t just want to take the first rate you’re offered. When I’m working for a client who wants a car and has credit challenges, I shop around on my computer with the lenders that VIP Autos is signed up with knowing that, if I can get them the best financing possible, they get to drive home in a car. So here is some good advice.
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Don’t take someone else’s word that your credit is bad. Check for yourself by getting your credit report and credit score. At VIP Autos, we give every client a Credit Score Disclosure.
As an experienced finance manager, I know that two people with an identical score might not be the same in the eyes of a lender. Even if your score is low, you may have a better chance than someone with the same score and no (credit) history.
For example, I’ve seen someone with a good score of 710 and still can’t get approved for a car loan over $10,000 because their only credit is a Pep Boys card for $200 two months ago. And I’ve had clients approved for $20,000+ with a 550 score because it’s more than the score. They had stability, previous paid car loans, and a good reason for the past credit problems.
Keep in mind that because car loans involve less money over a shorter period of time—and a car is easier to repossess than a home—the same credit score that might have put you in a subprime mortgage loan could bring you a prime or near-prime auto loan.
If you actually have good credit, don’t apply for a subprime loan. Some smaller start-up used car dealers only have subprime lenders. It’s likely that you will get less favorable terms than you deserve just because of the dealers limited choices. Be careful of a lender or lot that caters specifically to subprime consumers. Places that are appealing specifically to subprime borrowers should be a warning sign.
Again, as an experienced finance manager, I know that I can get some lenders to look at some credit-history challenged buyers in a more positive light than others, so it’s critical to know what to do to make yourself look better on paper rather than to look just at the credit score.
Even if you don’t think you can get a loan, go to your bank and go to your credit union first. Apply at the bank where you have a checking account or at your credit union. And see if your employer or insurance company offers auto financing. Check out sources known for car loans, rather than lenders known for catering to low-credit clients. This can include name-brand national banks, local and regional banks, and well-known online lenders.
Look for the cheapest money—the lowest annual percentage rate over the shortest period. Don’t be sidetracked by promises of a lower monthly payment over a longer period of time.
Also, never allow the loan to be contingent on purchasing any add-ons, such as extended warranties, after-market services, or even insurance. If you see the value and want these items, fine, but don’t be forced into it.
If you finance through a dealer, that’s OK too, just know your terms. Dealers will do spot delivery even before you are 100 percent approved based on the information you provided on your signed application. At times proof of income, residence and other stipulations are needed to fund your loan. And keep in mind if you provided what the dealership needed to get you approved, the dealership delivers the car to you, and later calls to say that they can’t get you “approved.” You can bring the car back and get all your down payment…just think of it as a long test drive.
Hope this helps,
The Hemet Car Guy
About the author
Richard Perry is the owner of VIP Autos in Hemet and is The Hemet Car Guy. This article has appeared in a previous issue of The Valley Chronicle. For more information, visit www.hemetcarguy.info