3 Things To Increase Your Chances Of Car Loan Approval


If your bad credit is preventing you from getting a car loan, it’s time to look at other options and the next possible step. There are things you can do to improve your chances of getting your next car loan.

Auto loans and your credit score

Traditional auto lenders, such as banks, credit unions, or captive auto lenders, tend to have high credit score requirements. Generally, if your credit score is below around 660, it can be difficult to find a lender willing to give you a chance to get a car loan. This means that even if you have enough income to pay for a vehicle, your bad credit can get in the way.

However, you are not out of options for a car loan, and there are things you can do to increase your chances of getting approved:

  1. Improve Your Credit Score
  2. Get a co-signer
  3. Review bad credit auto loan options

To help you decide the best course of action for your situation, we’ve covered each step in detail. Auto loans are an exact science, but these things can increase your chances of getting one.

1. Improve your credit score

There are a few things you can do to improve your credit score without too much effort on your part. Building credit is a long-term game, so if you can give yourself a little time before you apply, check out these credit tips:

  • Pay off your credit cards. If your credit cards are at or near their maximum, pay them off as much as possible. This is called reducing your credit utilization rate. If you owe more than 30% of your credit limits on your credit cards, it really lowers your credit score. The more you can get low credit card balances, the more your credit score will thank you for it.
  • Pay all your bills on time. Payment history has the biggest impact on your credit score, and a missed or late payment can stay on your credit reports for up to seven years. Your payment history is also important to lenders because one of their biggest concerns when applying for a car loan is whether or not you’re going to pay it off. Pay your bills and all other accounts on time and your credit score improves.
  • Review your credit reports. Sometimes errors can be found on your credit reports and they can lower your credit score. Common errors include accounts that are already paid, accounts that are not really yours due to identity theft or error, or a payment that has been incorrectly reported. The three major credit bureaus – TransUnion, Experian, Equifax – all have their own credit reports, and they are all likely to have different information. Take a close look at each one and dispute anything that doesn’t look right.

One of the first steps in credit repair is knowing what’s on your credit reports. You can request them for free at www.annualcreditreport.com and get a copy of each report from each office once a week until April 2021.

Having little or no credit history can also lead to a drop in your credit score because you don’t have much on your credit reports. However, the next steps can work for bad credit and for borrowers without credit.

2. Get a co-signer

Co-signers can help bad credit borrowers increase their chances of getting approved for a car loan. In order for a co-signer to help, they must have a good credit rating. The co-signers “lend” you their good credit rating and promise to pay off the car loan if you can’t. So they must have enough income in their budget to cover car payments as well.

Most borrowers ask a family member to co-sign for them, such as a parent or guardian. However, a co-signer can be anyone as long as they are not a spouse. Rather, a spouse would become a co-borrower, and it helps by adding more income – it usually doesn’t improve your chances of getting approved if you have credit problems.

If you find someone to co-sign, they have auto loan obligations like you, but they don’t get any rights to the vehicle since their name is never on the title. Although they don’t have any ownership rights, the way you handle the car loan does impact both of your credit scores. If you stay up to date with your payments, both of you can walk away from the auto loan with improved credit.

3. Auto loan options for bad credit

Not everyone has the luxury of waiting for their credit rating to improve or has the option of getting someone to co-sign the car loan for them. However, there are auto lenders who can look beyond bad credit: subprime lenders.

Subprime lenders tailor their loans specifically to borrowers with bad credit. Instead of relying solely on your credit to make a loan decision, they look at your income, job, residence, down payment, etc.

Finding a subprime lender means looking for a special financial dealer. Subprime lenders are third parties, so you never meet them and instead work with a special CFO who acts as an intermediary.

You submit all required documents to the CFO, who verifies them and then sends them to one or more subprime lenders. If you get approved, you’re told what you’re eligible for, and you and the dealership find a vehicle on their lot that meets your needs and budget.

Subprime auto loans also have the potential to repair your credit because they are reported to major credit bureaus. If you stay up to date on your payments and work on other aspects of your credit score, you can walk away with a full car loan and better credit.

Take the next step now

A bad credit rating can put you off after a car loan refusal. But if you know what action to take next, you can start looking for an auto loan with confidence. Knowing where to look for the right lenders who have the know-how for credit issues can also help improve your chances of getting approved.

Start the search for your next car loan here with us at Auto Express Credit. We have created a network of special finance dealers, and we match borrowers with bad credit with dealers who have the resources for them.

Fill out our free auto loan application form and we will search for a dealer in your area, with no obligation. Stop letting bad credit get in your way and start your car buying journey now!