You need a car. The money you spend on public transportation adds up, and the company you work for doesn’t have a reimbursement program. Why should you blow that money on buses and trains when you could use it to make a car payment? The problem is you have bad Credit, but guess what? You might be able to purchase an automobile anyway. You need to prove to lenders that even though your credit score isn’t what they consider ideal, you’re still responsible. Here’s how to stack the odds in your favor and get into a set of wheels that will help you build your credit for a better vehicle later on.
Clean Up Your Credit First
The first thing you should do is obtain your credit report from all three reporting agencies. This is free once a year, so if you haven’t run it already, this won’t cost you a dime. Look it over and see if there are any mistakes. If there are, file a claim for each mistake with all three agencies. Next, tackle the items that are real. Contact your creditors and explain why you had issues. Work out payment plans and get letters from them confirming these plans. You’ll need to show these to potential lenders.
Stick to Your Agreements
Next, be good and work to clean your credit up as much as you can. Don’t use your existing credit or take out new lines of credit, including credit cards. Rather, focus on the debt you already have. Pay your bills monthly – honor those payment agreements – so you can show automobile lenders that you are honoring your commitment to your creditors. This is crucial when you want to get a car with bad credit. Make certain everything is paid on time, including your rent, and pay extra if you can.
Save for Your Down Payment
Because you have bad credit, you will likely get a loan with a higher interest rate. Rather than getting yourself in trouble with more debt that will take you years to pay, not to mention double the sticker price of the vehicle once it’s paid off, save for a large down payment rather than the minimum requirement. The more you put down on the car, the less you have to pay off, and some lenders will lower the interest rate on the loan if you can drop a significant down payment from the get-go.
Budget Only What You Can Afford
While you take a few months to clean up your credit report and save your down payment, sit down and calculate a car payment you can afford to pay. Be honest and don’t think about the car. If your credit is less than stellar, you won’t be hopping into your dream ‘Vette anyway, so give that up. Look at your income and expenses and see how much you have left over for a car payment. A general rule of thumb is your car expenses, including insurance, shouldn’t be more than 10 percent of your income.
This being said, if you can’t afford 10 percent to put toward your car, it’s probably not a good time to buy one anyway. Perhaps you’ve cut yourself too short in the past and this is why your credit score isn’t what it should be. Remember, you need to cover your existing expenses, including entertainment, stash money into a savings accounts for emergencies and your future, and be able to pay your car and insurance payments and fuel and maintenance costs. Can you add that burden to your budget?
Get a Second Job
If you can’t, you may need to work a second job for a while. With the increased demand for telecommuters, you might be able to find something you could do at home in the evenings once your done for the day at your full-time gig. If not, it’s time to swallow your pride and take a part-time night shift somewhere. Talk with your boss, too, and ask what it will take to get a raise. Perhaps she or he could put you on a path for a promotion and higher pay, which would be beneficial all the way around.
Finally, get pre-approved for your car loan. This tells you how much you can spend and prevents you from going over your limit. All of this adds up to smart car shopping and a new set of wheels.