With a score of 600 or below, getting credit can be a bit of a challenge. It is possible to get a loan but getting a good rate will be another matter. Here are some ways to get a car or truck loan with a credit score under 600.
Get A Co-Signer
This is the best way to go about things if it is an option to you. A co-signer would share in the responsibility if the loan. If you were to default, they would be just as responsible for paying off the debt as you are.
That is the bad part. The good part is that the loan would be scored on their credit score. This means that if they have good credit, not only would you get approved for a loan, you would get a much better rate than you probably could have by yourself.
It goes without saying that co-signing is a risky deal for whoever you ask. You would have to have a close relationship and be very careful with your finances so as not to cause them any financial harm.
Because of this, a co-signing deal is usually best for a parent and child situation. Although another family member or friend might be willing to sign for you, it is probably not a good idea.
Put A Lot Of Money Down
Lending is all about risk assessment. If you put nothing or next to nothing down, you become a bit of a risk. If the lender were to need to take the vehicle back, they would have a hard time selling it and getting their money back.
If you have bad credit, your odds of approval will be much better if you put at least 20 percent down. This will pay for the depreciation that occurs in the first year.
So, if a vehicle costs $20,000 you would want to try to put down at least $4000 on the car or truck. Sounds like a lot but if you put your mind to it, you should be able to save that much. Here are some ways to come up with $600 or more doing odd jobs and side hustles.
Bad Credit Car Lots
If all else fails, a bad credit or “buy here pay here” car lot might be your solution. They will finance just about anyone but you will pay very high interest and usually some sort of deposit.
This should really be the last resort because you will pay dearly in interest. In addition, you will pretty much have to take what they have. You might have a few dozen different cars to choose from.
Finally, keep in mins that they will probably come get the vehicle very quickly if you miss a payment. Count on there being some sort of GPS tracking device hidden somewhere int eh vehicle.
At this point, if you can not secure a car loan, your best bet might just be to get a cash car.
For a couple thousand dollars, you should be able to buy something that will at least get you by until you can rebuild your credit enough to get financing on something newer.
If you are looking for something like this, your main emphasis should be on repairability. You want a vehicle with cheap parts that can be cheaply fixed. A domestic compact is probably your best bet. Domestic cars are typically cheaper to repair. An alternator, for example, on a Ford focus might only cost 250 dollars to replace while it might be 500 dollars on a Toyota.
Improving Your 600 Credit Score
Now, let’s take a look at how to increase that poor credit score. A 600 credit score can affect you in a number of ways besides just your vehicle. It can also cause you to pay more for services like insurance, can make you pay higher deposits for utilities and could even potentially harm your chances of getting a job. Like it or not, your credit score is a big deal.
If you are rocking a 600 or less score, let’s look at ways to get that higher.
Pay Down Your Debt
If you have credit card debt, you should start by paying that debt down. You want to be using less than 30 percent of your available credit and as you get closer to that level, your score will keep increasing.
Get A Secured Credit Card
If you have no credit accounts, start with a secured card. With as little as 500 dollars, you can open a credit card account and help building credit experience. Secured cards work just like regular cards but they hold money from you as collateral. It is no risk to them and they still charge interest but it gets you some credit history.
Not all collections though. If an account is 5 years old, for example, it will fall off in a few years so you might just let that one go. If you have recent collections though, they will be with you for some time to come. Negotiate settlements but be sure to get everything in writing.
Pay Your Bills On Time
You can help your credit quite a bit by paying your bills on time from this point forward. If you have some 30, 60 or 90 day late payments, time will lessen their effect on your score. Be patient.
Check Your Report For Errors
Errors happen on credit reports all of the time. Use a service such as Credit Sesame to pull your credit report and see what exactly is on there. Dispute any negative information. Keep using the credit reporting service to stay in touch with your report and your credit scre from now on.