When it comes to getting approval for a car loan, lenders have a very specific set of criteria for you. They want you to have an established pattern of credit. They want to see evidence that you pay your bills on time, that your credit history is free of black marks. They want to see that you don’t forget to pay your bills or pay them late.
As a general rule, lenders also want evidence that you make at least $1600 a month. Depending on where you live, they might want to see more. If you don’t make this minimum, you will not meet the basic requirements for financing and will potentially damage your credit rating by being rejected.
Before you are approved for a car loan, prospective lenders and dealers will want to review your credit report. They will look at your past creditors. They will review your open credit accounts and loans. They will want evidence that you are not carrying a large amount of debt.
They will not want to see lots of open accounts. Your balances should, ideally, be very low. It should be zero whenever possible.
Multiple credit cards and store cards are what put people hopelessly behind when it comes to money and debt. If your credit card balances are above 50%, it is likely that lenders will reject your loan application.
In addition to scrutinizing your finances, most lenders will ask for proof that you have been living at the same address for six months or more. People who have not been in a place for more than six months are categorized as nomads. Nomads continually move. One of the consequences or motives for this is considered to be a desire to avoid having to pay debts.
Your credit history is also going to play a crucial role in determining your eligibility for a car loan and the likelihood of you obtaining competitive terms. If you have no credit history, you have little chance of being approved. If you have no credit history at all then you will need at lest six months to establish credit before applying for a car loan. You will not get approved without credit.
No credit at all means that you have limited capacity to build credit. Such is the way that the world operates at the moment. Your options are limited, not non-existent. If you have no credit, you can probably still manage to open a gas credit card or a credit card offered by a store like Target.
Shop as you would normally but use your credit card to make the actual purchases. You should then be paying off your balance in full every month. You must not overspend or let any of your balances reach 50% of your credit limit. Things like this will undermine your credit score.
Without ever having had a credit card, you are unlikely to have a credit score. Either you have no score or it’s below 550. In either case, no lender is going to offer you financing, least of all competitive financing.
Overlooking the basics is the reason that most people get rejected. Many adults think they can go through life without paying their bills. Unfortunately, big brother is watching everyone these days. When you refuse to pay, whether it is a medical bills, credit card payments, loan installments, traffic tickets, or late apartment rent, it all gets reported on your credit report. A negative detail on your credit report, a black mark, can keep you from getting financing for a period of seven years.
People with credit scores of 680 or less should not submit applications for financing. They should concentrate on raising their credit first. Rejected applications bring down your credit score so you should be very strategic when applying.
You might try and apply for a bad credit car loans from a network of high risk lenders and car dealers. Some of the high risk lenders will even offer reasonable rates if you have had a bankruptcy.
In some instances, even a high interest auto loan is going to help you in the long run. Assuming that you build your credit by paying on time, the next time you go to buy a car or a house, for instance, you are going to find yourself in a strong financial position.
By observing the rules of the auto financing game, you can go a long way to improve your overall financial situation and come out on top of your financial deal.