Bad Credit Auto Loans

Loans are issued for major purchases based on the credit ratings of borrowers seeking funds.  Cars and homes particularly, require mortgages and loans to fund their big-ticket purchase prices.  The terms and conditions attached to car loans and mortgages are tied to general prevailing economic conditions, but they are also influenced by borrowers' past credit interactions.

The best interest rates and repayment conditions are reserved for consumers exhibiting the soundest histories managing their credit responsibilities, so the importance of maintaining a good credit rating cannot be understated. As you seek auto loan financing, be prepared to put your best foot forward credit-wise, or risk being denied for car loans.

Building and Keeping a Solid Credit Rating

Establishing credit starts early, with initial credit interactions engaged by young adults.  Beginning with mobile phone contracts and term payments for used cars, young people make entries to their permanent credit records.  Each success is a feather in the cap of a responsible borrower, committed to maintaining pace with his or her payments.  On the other hand, late payments and other credit irregularities are quick to undermine the limited credit exposures of young borrowers.

Student loans are another early credit building opportunity, providing payback examples for future creditors to see.  Solid payment histories repaying college costs, combined with success managing other credit interactions are sufficient for establishing good credit out of the blocks, but responsible behavior keeps ratings on track.

It is easy to dismiss the importance of a single payment here or there, but even utility companies report delinquent payments, underscoring the importance of covering all the bases paying bills.

Bad Credit Indicators

As consumers move through life, various forms of credit cover purchases large and small.  While young people struggle to establish enough credit early-on, seasoned adults are constantly challenged to maintain it.  Major shortfalls, like mortgage default or automobile repossession are credit-killers, virtually wiping out your borrowing ability for a number of years.  If these unfortunate results of inadequate cash flow appear on your credit report, you'll need help getting a loan.

Lenders use information from three major credit reporting agencies to determine your creditworthiness.  Important information gleaned from reports includes the scope and types of credit you utilize regularly, as well as your past success paying-off loans.  Limited credit works against you, as well as a lack of diversity in the credit you do use.  Cars and homes, for example, are purchased using installment credit, which provides one metric for judging risk, while credit cards and other forms of revolving credit provide another.  To give good ratings, credit reporting agencies like to see a solid long-term history of credit interactions, containing diverse entries from multiple credit providers.

The amount of open credit contained on your report also influences your borrowing ability.  Debt to income ratio is particularly important, because it accounts for your ability to pay for current debts, simultaneously considering how your fiscal health might be impacted by adding another payment to your monthly commitments.  If your income does not support further debt, a cosigner or co-borrower might be required to secure your loan.  Bad credit mortgage calculator breaks down principal payments and interest charges, to help gauge affordability.