Buying a Car with Bad Credit or No Credit

couple holds key in front of new car

While buying a car should be an exciting time for car shoppers, it can come with its challenges if you have bad credit or no credit. When you apply for financing or a loan to buy a car, auto lenders and finance companies will review your credit history to determine whether you will be approved and, in some cases, what interest rate you will receive.

Typically, these companies consider borrowers with prime and super prime credit scores (661-850) to have high creditworthiness, meaning they’re suitable to receive financial credit, often based on their reliability in paying money back in the past as reflected, in part, by their credit history. As a result, prime and super prime car buyers generally get approved for traditional car financing with lower interest rates.

On the other hand, borrowers with bad credit or no credit generally fall in the nonprime (600-660), subprime (550-600), and deep subprime (below 550) credit score range. Since auto lenders and finance companies that offer nonprime to deep subprime financing are extending credit to borrowers with low creditworthiness, they will typically charge car buyers in these categories a higher interest rate.

If you have bad credit or no credit, here are a few key steps to take during the car buying process:

  1. Check your credit.
    Before you start visiting car dealerships, you can check your credit report and credit score. Your credit report is a document containing your personal information, credit account history, credit inquiries and information gathered from public records, which may include bankruptcies and open/closed accounts.

    The information found in your credit report is used to calculate your credit score, which is a numeric value that informs potential auto lenders and finance companies about your creditworthiness. You can access your credit report for free once every 12 months through Equifax, Experian, and TransUnion.

  2. Set a car budget.
    Whether you plan on buying a new or used car, setting a budget is always wise. You can do this by reviewing your current expenses, calculating how much you need for a down payment, setting up a car savings fund, and managing your spending. If you currently own a car, selling or trading it in can help with purchasing a newer vehicle.

  3. Do your research.
    Once you have a better idea of your credit history and car financing options, you should research car options that best fit your needs. You can start by narrowing down which car type(s) is/are most suitable for your situation based on your usage, style preferences and the number of passengers you expect to accommodate (SUV? Truck? Van? Sedan?). After that, you can move on to determining your car vendor preferences and whether you plan on purchasing new or used based on your car budget.

  4. Find a car dealership that can approve every customer.
    If you have bad credit or no credit and are shopping for a new or used car, it’s important to find a bank or car dealership that can offer you the right type of car loan or auto financing for your financial situation. There are many dealerships that offer subprime financing to credit-challenged car buyers in need of credit approval to buy a car. Credit Acceptance can help you find up to three car dealerships enrolled in its program near you by filling out our pre-qualification form on our website.

  5. Visit a car dealership.
    After you’ve done all your research, you can visit a local car dealership to determine which car best suits your needs and budget. When you’re ready to purchase, you want to make sure you bring all the necessary documents to the car dealership.

Credit Acceptance is an indirect auto finance company that works with more than 12,000 car dealers across the nation to help credit-challenged car buyers get approved for financing. Simply fill out the auto finance pre-qualification form on our website to get started

Start your auto financing pre-qualification today!