Q:

How can you buy a used car with bad credit?

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Quick Answer

A used car can be purchased with bad credit by checking the credit scores a few months in advance of a purchase, and by shopping around for good deals and flexible loans, according to Edmunds.com. Depending on where the used car is purchased, expect a higher interest rate for the loan due to the low credit score.

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Full Answer

If the credit score falls below 620, creditors consider the buyer a subprime borrower. Subprime borrowers carry a higher risk of default, so they pay higher interest rates for car loans than other borrowers. When checking the credit score, it is possible to correct inaccurate information on the report, such as items that don't belong to the prospective car buyer. These disputes should be taken up directly with the credit agency. Catching up on delinquent bills demonstrates credit-worthiness to the lender.

Shop around for car dealers that extend credit, such as Buy Here Pay Here facilities. Ask the dealers whether they report payments to credit bureaus, and if so, under what conditions or time constraints. Shopping for new cars instead of used ones can present better loan opportunities, because new cars provide more valuable collateral should you fail to make your payments. When buying an older vehicle, bear in mind possible repair costs if the purchase does not include a warranty.

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