I have a credit score of 550, what are my car buying options?

Dealing with bad credit isn’t easy, and it can be even harder when you need a car loan. If you have a credit score of 550, your car buying options will likely be more limited than those of someone with good credit. However, that doesn’t mean you can’t be approved for a car loan, and we can help you find one.

Types of lenders to work with

What are your options when you have bad credit? When you still should try to get pre-approved from your bank or credit unionyou’re probably not going to be funded by either one.

If they turn you down, your next step is to find a dealership that works with car buyers with credit difficulties. We can help you find one, but first let us explain the two types of lenders you can expect to work with:

  1. Subprime lenders – These lenders offer loans through special finance brokers. They consider your credit score, but they also use additional factors to qualify, such as your income, residency stability, and job stability. What makes financing through a subprime lender great is that you have the opportunity to improve your credit score through on-time loan repayments.
  2. Buy here pay here dealers – Buy here pay here (BHPH) dealerships offer in-house loans for vehicles on their lots. The best part about these types of places is that they don’t use your credit when qualifying, making it easier to get approved if you have bad credit or no credit. Instead, they base approvals on your earnings. Because they don’t do credit checks, they may not report your loan or payments in a timely manner to the credit bureaus, which means you won’t be able to improve your credit score over time.

With both types, you are usually required to pay a deposit and you can expect your interest rate to be above average, potentially in the double digits. This increases the overall cost of the loan, and is something you need to be aware of when budgeting for a loan.

How to increase your chances of approval

Although these lenders specialize in bad credit car loans, getting approved for financing is not always straightforward. In addition to coming prepared with the appropriate documents ready, you may want to consider taking additional steps to increase your chances of approval.

You can always make a larger down payment than required. This not only increases your chances of approval, but also saves you money on the overall cost of the loan.

You can also add a co-signer or co-borrower to the loan. Do not confuse the terms “co-signer” and “co-borrower”. Although both must have good credit and sufficient disposable income to qualify for a loan, it is not the same thing.

Co-signers sign the loan so you can use their good credit to boost your application. They are not equal owners of the car, but the loan shows up on their credit reports and can impact their credit score.

Co-borrowers, on the other hand, are equal owners of the vehicle and have their names on the title. You can combine your income to qualify for a loan with a co-borrower who is your spouse, but not with a co-signer. This allows their income to boost your application so you can potentially qualify if you couldn’t before, or qualify for better terms.

Ready to find a car dealership?

Don’t let your bad credit stop you from get the car loan you need. To Auto Express Creditwe specialize in connecting car buyers with bad credit to local dealerships who are registered with subprime lenders.

All you have to do to get started is fill out our free and easy form car loan application formand we’ll do our best to put you in touch with a dealer near you.

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