Car loan with bad credit: check your report before you shop
The quick answer
Before you shop for a car with bad credit, get your free credit reports and dispute anything wrong, then get preapproved by a bank or credit union so you know your rate before you walk in. A mistake on your report can cost you a higher rate for the whole loan.
Why your report matters at the lot
The lender sets your rate from your credit. A collection that is not yours or a late payment that never happened can push you into a higher rate, a bigger down payment or a buy here pay here lot. Fixing a mistake before you apply is the cheapest way to lower your payment.
Start a month or two early
A dispute usually takes about 30 days. Get your free reports at AnnualCreditReport.com, dispute anything wrong and give it time to clear before you apply. The step by step guide walks you through it.
Get preapproved first
Apply with your bank or a credit union before you go to the dealer. Credit unions often work with members whose credit is not perfect. A preapproval tells you your rate and how much you can borrow, so you can compare it with anything the dealer offers. Find one near you with the credit union locator.
Shopping for rates will not wreck your score
FICO scores count several auto loan checks made close together as one. Older versions give you a 14 day window and newer ones give you 45. Keep your shopping to about two weeks to be safe.
Buy here pay here lots
Some buy here pay here lots do not report your on time payments to the credit bureaus, so the loan may not help you build credit. Ask before you sign.
Ask before you sign
- What is the total price and the interest rate?
- Do you report my payments to all three credit bureaus?
- Is there a penalty for paying it off early?
- What add ons are in the price, like a warranty or GAP coverage, and can I say no to them?
- Is this rate final, or can it change after I drive off?
Common questions
Does a bigger down payment help?
Usually. A bigger down payment means a smaller loan, which can help you get approved and lower your payment.
Will checking my own credit report lower my score?
No. Checking your own report never hurts your score.
Do it from your phone
Open your report in ZungiDill, tap what is wrong, and it writes the letter and reminds you when the answer is due.
Sources
- Consumer Financial Protection Bureau: Auto loans
- myFICO: How to rate shop and limit the impact on your FICO Scores (Business Wire)
- NCUA credit union locator
- AnnualCreditReport.com, the official free credit report site
General information, not legal advice.