Car Credit Blues: How Poor Credit Impacts Your Car Purchase


Most people have a dream car they hope to purchase, but often poor financial decisions along the way impact those dreams. For those with poor credit, that can mean the difference between buying the car of one’s dreams or of one’s nightmares.

Car Credit Blues, How Poor Credit Impacts Your Car Purchase

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What Can be Purchased

Even if it’s been smooth sailing financially in recent years, a poor credit score can restrict the type of car a person can purchase. Even with a large down payment and bills recently paid, a dealership will be reluctant to approve a loan with large payments over several years for fear the buyer will revert to their old ways when paying bills.

Interest Rates

Poor credit is a major factor when determining the interest rate on an auto loan. Many dealers offer special credit terms for “approved credit,” but often that means having a credit score of 700 or higher. For those with lower scores, interest rates can be twice as high as these offers or approach 20 percent for buyers with very poor scores. You can learn more about how your credit score will affect your personal interest rates at car dealerships in Kansas City and around the US.

Co-applicant Credit

Many times, a buyer will need someone to co-sign the loan with them before the dealer will approve the loan. However, if the co-signer has poor credit, it can have a negative impact on the loan. If the buyer has marginal or poor credit along with the co-signer, the loan will carry a much higher interest rate along with a shorter time frame for paying it back. In many cases, the loan may be denied altogether if both buyer and co-signer have poor credit.

Spouses and Credit

Many couples believe if one of them has poor credit it will cancel the couple’s chances of buying their dream car. However, that’s not always the case. If a loan is structured so that the name and social security number of the spouse whose credit is bad does not appear on the paperwork, their bad credit will not affect the loan. But if income from the spouse with bad credit is needed to purchase the car, this strategy may not work and the result may be a denial or a loan with high interest rates.

So while poor credit can be a barrier to purchasing many big-ticket items, it does not necessarily mean a deal cannot get done when buying a car. By being honest about one’s finances and finding a dealer willing to make a deal, a buyer can often indeed drive off in the car they’ve always wanted.

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