Bad Credit Car Loan Lenders

When it comes to reestablishing your credit, sooner or later you are going to have to "bite the bullet" and take out a bad credit car loan. But it also helps if you currently own a vehicle that is paid off. If this is the case you could qualify for one of the programs offered by many bad credit car loan lenders

Short history of bad credit car loans

Prior to the 1990's, most car buyers with bad credit either had to take the bus to work or were forced to deal with dealers that specialized in in-house financing commonly known as buy here pay here car lots or tote the note car dealers. And while public transportation works if you live in a city, it isn't really a viable choice if you live in the suburbs and rural areas.

For those customers who wanted to rebuild their credit and raise their FICO scores, these buy here pay here car lots were a dead end, since most of them didn't (and still don't, for that matter) report customer payment histories to the three major credit bureaus.

The current state of bad credit car loans

Beginning in the early 1990's, a number of car loan lenders - both public and privately held - began to enter the subprime auto lending arena. The upside to this was the fact that most of them reported to the credit bureaus, enabling customers to reestablish their automotive credit. For many of these customers, it meant a step towards being able to eventually deal with a prime lender. The downside, and there is one, is that the interest rates charged by these subprime lenders can range from a few percentage points above near prime, all the way up to the mid to upper 20% range.

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Getting a bad credit car loan today

The first thing that you should always do before applying for bad credit auto loans is to get a free copy of your credit report. It also would help if you paid to get your FICO scores. Federal law stipulates that you are entitled to one free credit report per year from each of the three credit bureaus - Equifax, Experian and TransUnion. You are also entitled to a free credit report in addition to your free one if you have been turned down for credit based on information from any of the three bureaus.

Once you receive your report and your score, review the information and make sure that it is accurate. If not, there are ways that you can have the information corrected. You can find more information about how to improve your credit score from our credit repair informational site.

If your FICO score (the most commonly used credit score) is below 640, this typically means that you are in the less than desirable pool of subprime credit customers. At this point, you have a choice. You can try and raise your score above 640 (or more) and then buy a car, or you can apply for a bad credit car loan and raise your score by making all of your monthly payments on time.

If you can afford to wait to apply for a car loan, there are other ways that you can raise your credit score in the mean time:

Pay your bills on time. This will prevent any further delinquencies on your credit report.
Begin paying off your delinquencies. Start with the small ones and work up to the larger ones.
Apply for a secured credit card or a high risk unsecured credit card and pay off the balance every month or keep the balance to within 20% of your credit line.

Even with bad credit you may have choices. If you have to have a car now, the good news is you don't have to settle for an old beater. While a bad credit car loan is not designed to get you your dream car, there are many low mileage high quality used cars that will qualify for these programs. Many subprime lenders will even finance new cars.