For many Americans, the chances of finding a good auto loan are extraordinarily slim. According to Mark Whitehouse of the Wall Street Journal, 25 percent of Americans have a credit score of less than 600. Bad credit habits, temporary loss of employment and unexpected life events can all contribute to a credit score that isn't as pristine as many Americans expect. Nevertheless, an unfavorable credit score shouldn't prevent you from finding an auto loan that meets your needs.
There are many things you can do to prepare yourself for applying for an auto loan. Many of the following points can also help you raise your credit score, which can improve your chances of finding a good auto loan.
- Get a copy of your credit report and make sure it offers accurate and up-to-date information. Having a mistake on your credit report can easily knock down your overall credit rating.
- Pay off your debt. The leading cause of a poor credit score is often having significant amounts of debt from credit cards and other existing loans. If it's possible, focus on paying off those debts before pursuing an auto loan.
- Shop around for better interest rates. The average interest rate for those with bad credit ranges from 10 percent to 20 percent. Interest rates can vary between lenders, making it a good idea to shop multiple lenders.
In many cases, bank loan officers are willing to work with those with less than perfect FICO scores on a case-by-case basis. It all depends on your particular circumstances and your relationship with your current bank can also be taken into consideration.