If you have been turned down because of poor credit but have a credit score of 500 or better, you may still qualify for a subprime auto loan.
Consumers need to organize their finances before they apply for a subprime auto loan. This means not only knowing one’s monthly income, but one can afford to spend on this vehicle. Lenders will want proof of earnings, and it helps to have a car make and model in mind. In fact, if a consumer walks in knowing which car he or she wants to buy, this can speed up the process. While requirements differ from lender to lender, there are general requirements that Valley Auto Loans has in place for applicants.
Lenders who specialize in loans to those with sub-par credit require:
- At least 18 years of age
- Currently lives in Canada or US, and is a legal citizen
- Guaranteed employment (full-time or fixed) with at least a gross income of $1,500/month ($1,800/month suggested)
- Documented evidence of income. Income must be documented on professionally prepared and filed tax returns for the past two years.
Gross income is the amount that you make per paycheck before it is taxed. To stay on the safe side, we require that all applicants verify and confirm their income by showing a record of past tax documents. Of course, benefits such as child support, social security, alimony, or disability insurance should be included as well.
Your options for a subprime car loan may be limited by your employment status. To make sure that all of our approved applicants will be able to make payments on their vehicle loans, we cannot accept applicants that hold seasonal positions or have been at a temporary job for less than six months.
Degrees of Subprime Credit
It has to be understood that while one lender might see your credit score of 580 as being unacceptable for receiving a car loan, another might consider it to meet the requirements of their loan. Look at the table below to decide where you fall concerning credit. Valley Auto Loans uses this information to determine many factors that play into your subprime car loan.
- Decent | 625 – 600
- Average | 600 – 575
- Below Average | 575 – 550
- Semi-Poor | 550 – 525
- Poor | 525 – 500
- Bad | 500 – 450
- Awful | 450 – 425
- Terrible | 425 – 400
When analyzing each subprime car loan application at Valley Auto Loans, not every credit score is viewed in the same light. For example, a credit score of 575 is not always looked at as unsatisfactory. In actuality, the credit history is checked along with the score to find out exactly what happened to generate that number. His/her questionable credit history will be examined to decide whether it is habitual or situational.
Situational Subprime Loan Credit
A bad credit score is shown when a person’s history is filled with maxed out credit card balances, missed payments to various accounts, frequent changes in jobs, and low-income. On the other hand, a situational poor credit history might show that someone has kept a high-paying job and has diligently made payments on credit accounts. They then had an unexpected financial emergency springs up and lost their good credit score. In this case, the person with a situational bad credit score would likely be perceived as less of a risk. Less risky than offering car loans to drivers with terrible credit, even though these two people technically have the same credit score. Those who do not have the credit to secure the loans necessary to buy a car by some lenders are excepted by bad credit lenders.
Typical traits of subprime credit history include multiple outstanding balances, bankruptcies, and delinquent on the existing accounts. Typical characteristics of a situational poor credit history include sudden loss of job, divorce, a medical emergency, illness, etcetera.
Improving Your Credit
Taking the right steps to reconstruct your credit score from 575 to 640 may seem like a daunting task, but it is probably the best way to get better rates on your auto loan. If an applicant’s credit score is below but close to 575, it is likely that they can even qualify for a loan, but they probably don’t qualify for the best or even the mid-tier rates. People with scores at or above 640, however, are usually able to be eligible for these mid-tier rates, allowing them to save thousands of dollars over the life of the loan.
Many have discovered, because of a bad credit score, they were not eligible for the financing they need for their dream car. Fortunately, there are things you can do to get your credit score up. If your score is hovering 575, odds are you’ve made a few small mistakes with your credit. You have not, however, made a major mistake such as filing for bankruptcy or going through a repossession within the past three years. Therefore, these strategies should help you get the increase you need and help turn things around so you can qualify for a better interest rate.
- Pay off charged off accounts. The most common reason for having a credit score in the high 500s is an account that didn’t get paid. Usually, this is an old medical bill or credit card that got sent to a collection agency when you forgot to pay the bill. A charge-off is sold to a bill collector who pays pennies for the amount you owe. The difference between what they paid and what you owe is their profit, but it also means that you can negotiate with a bill collector to get the bill reduced. By agreeing to pay off the balance, the bill collector makes a profit and is usually willing to take the wrong information off your credit report. Of course, make sure you get this agreement in writing before you pay off any old bills.
- Pay down your debt. If you are using a lot of your available credit, your score will go down. Get some of your debt paid off, or ask for the limits on your credit cards to be raised to improve the ratio between the debt you owe and the credit you’ve been extended.
- Wait. If you missed a payment, odds are you will not be able to get the mistake taken off your record, but it will affect your score less and less as time goes on. Wait a few months, don’t make any mistakes, and your score will go up.
To Start the Subprime Car Loan Process
The auto loan process starts as soon as you apply for one. After completing an application and submitting it, Valley Auto Loans will begin the search in a vast network of the best subprime auto lenders and financing groups. There is no application fee and no obligation. We also offer auto refinance for bad credit, so as your credit improves over time you have the ability to refinance later for a lower interest rate.
One subprime car loan lender might be willing to lend money to an individual that has a car repossession in their history while another might consider it too high of a risk. This is why using services like Valley Auto Loans to search a diverse database with their fast and smooth process for lenders that meet your needs is the best route to go. Because the network spans over such a long distance and has so many dealers, it is easy to find a match for any applicant, regardless of his/her credit situation. When the dealership is located for the applicant, they are then free to contact him/her about vehicle options. The vehicles availability and the loan agreement terms will depend on the individual dealership.