Lenders are requiring higher FICO scores in today’s auto financing marketplace

Here are ways you can successfully finance your next car with a low FICO score

If you are in the process of considering buying another car and you have bad credit, I’ve got some good news. In 2011 lenders for auto financing that specialize in fair, poor and bad credit are back in the market with plenty of money to lend. Unlike the last several years when auto financing was very hard to find, particularly if you had credit issues, those, with poor or bad credit, looking to finance a car today should be able to find multiple loan offers. It’s still not as easy to get the best financing available  just by walking in the door and it still requires staying aware of what you are doing to get the best rates. Let’s take a quick look at what’s involved. To start, it’s important to understand where good credit “ends” and “poor” credit begins.

The much talked about FICO score is a combination and a summary of your overall credit score. There are 3 major reporting services and their information is often combined to provide the FICO number which can range from the lowest number of 300 to “perfect” at 850. Traditionally any credit score above 750 has been considered very good and fair credit is any thing below 660 with bad kicking in around 500. Since the “financial crisis” the scores have moved up and now even a 700 can be considered fair. This has resulted in more and more people, who think they have good credit, being surprised to find that they are now considered to be fair or poor. Needless to say, the place to start in getting your next car loan is to get your credit score and know where you stand.

If indeed you are in the mid 600’s or down at 500 or below you should consider yourself as needing auto financing for bad credit. You are pretty much misusing your time going to S&L’s and banks looking for car financing since today they generally only want to work with good credit. If you find yourself in this predicament, a great resource is the internet. Today there are many reputable online lenders who specialize in working with poor to bad credit.  Many of those with a presence on the web have been working with borrowers with bad credit for a number of years and know how to work through most of the obstacles. However, it never hurts to take a few proactive steps to help insure that you are successfully funded. Among the most important to consider are:

1. If you see a mistake on your credit report, get it corrected. This can be done by contacting the company providing the report. They are obligated to change your information if they can’t prove it’s correct.
2. If there’s any way you can put some cash down on your next auto purchase, it will have a positive ripple effect on the entire financing process. It’s like sowing a seed and watching a plant grow. It will make a difference with every party you work with in this process.
3. Don’t get emotional and buy “more car” than you can afford. It’s important that you are trying to borrow an amount of money that you can actually pay back.  For planning purposes, make a mental note to try and keep your monthly payment to one third or less of your monthly disposable income. This will allow you to make your payment even if you hit a rough bump in the road.

While there are many more areas we could talk about, these are the most important and if you remember just these few things, the auto financing process will move along much easier and help you work through your poor and bad credit issues.