Many of us have landed in the position of having bad credit at one point in our lives. You are not alone in this financial spot. Roughly 35% of Americans have a credit score below 620.

How did most people get into the position? Divorce, separation, bankruptcy, defaulted on some payments and damaged their credit, poor financial advice, business plans failed, job loss and medical bills are a few of the reasons you may need a bad credit auto loan.

Regardless of how you got here, we want to provide you a few options to purchase a vehicle even with bad credit.

Searching For A Car With Bad Credit

If you have bad credit, low credit, no credit or have been turned down in the past due to bankruptcy, we know of qualified lenders that would do their best to help you get a car loan with special financing programs.

Improving Your Credit Score Disclaimer

We highly recommend that you do everything you can to improve your credit score before applying for additional funding of any kind. Your interest rates fees will be higher, the vehicle type will not provide you all of the options that you want and lender choices will become limited.

The only time to get a loan when your credit rating is below 620 is an emergency. Getting yourself to work so you can pay the bills and drive your family to school and appointments are very important.  You must determine what is an emergency for your family and if buying a car now if a priority.

Not All Bad Credit Auto Loans Are the Same

Your credit score will be a large factor in how dealers and lenders view your credit. Unlike the standard credit score chart for all credit types, the bad credit loan chart is quite different. When you apply for an auto loan, the company will have the vehicle as collateral. This provides the lenders more flexibility:  

  • Very Bad Credit Scores | 300-399
  • Bad Credit Scores | 400-525
  • Subprime Credit Scores | 525-550
  • Below Average Credit Scores | 550-575
  • Low Credit Scores | 575-600
  • Fair Credit Score | 600-680

Lenders Divide Bad Credit into Situational and Habitual Applicants

Lenders can look at bad credit auto applications in two different categories. They call these categories situational and habitual. An example of this would be someone that is in and out of jobs, has missed or defaulted on payments many times over and has walked away from vehicles or property in the past. This person would be considered a habitual risk and would have a very difficult time getting any type of loan.  

A situational applicant example would be someone that has a decent job and has made their payments in the past until something happened like illness, divorce or job loss. While both people have a lower than average credit score, these people cannot be painted with the same brush. The person in the situational example has run into a life issue where the habitual applicate is behaving irresponsibly with no intention of changing and will continue trying to "screw the system."   

The situational applicant has run into a life issue, where the habitual applicate is behaving irresponsibly with no intention of changing and will continue trying to "screw the system."  


  • Divorce/Separation
  • Medical, illness, unable to go to work
  • Job loss
  • Bankruptcy due to unforeseen issues 
  • Bad financial advice
  • Business plans failed


  • Many issues like Multiple bankruptcies
  • Addictions
  • Outstanding issues with all existing loans, credit cards
  • Cannot hold a job for more than 90 days

As you can see by the examples above, these are very different circumstances for the lenders and the lenders do understand that people get into situations beyond their control. 

Bad Credit Car Loan in the USA

Bad credit auto loan providers work with a network of lenders to spread out the subprime business. These bad credit providers will contact banks, credit unions, online lenders and peer to peer lenders to find someone that will take on some risk.

We wanted to find a lender that specializes in bad credit auto loans. We realized very quickly that this is a very specialized field of lending that requires a large network of connections to automotive dealers, contacts with all type of lending institutions and can offer this service all over North America. Once we set our criteria, we came down to one provider. 

Rebuilding Your Credit with a Bad Credit Auto Loan 

Trying to rebuild your credit after a long period of struggling to get ahead can be overwhelming. Losing a job or recovering from a medical procedure can be hard enough before even trying to rebuild credit. Going through bankruptcy or home foreclosure is devastating and will cause your credit score to drop significantly. 

A bad credit Auto loan may be a start to helping you with rebuilding your credit. (We never recommend anyone to take on credit when you have a poor credit rating unless it's an emergency). A car will get you to work and at times, the only way to be employed. 

Here is what you will need to do to Improve Your Credit Score 

  1. Make every payment on time. We would suggest you set up auto-withdrawal to make sure you are never late on a payment. (We already know what your thinking, we can't do that, the money may not be there. I may have spent it on food, rent or other things. If you can not commit yourself to set up auto-withdrawal, don't apply for the loan). Do not purchase this car if it may hurt your credit, it's not worth it.
  2. If you make every payment on time, you will improve your credit score and eventually, you will be able to buy the car you really want.
  3. You will get into a vehicle without having to put up allot for collateral. Remember, this will be a car of practicality, not the car of your dreams.  

What Will a Bad Credit Car Loan Cost

You should expect higher interest rates with bad credit. The term may be shorter depending on your credit score and history. The car dealership will mark up the vehicles in many cases when you have bad credit. 

Best Bad Credit Loan Providers

We always consider the best loan provider is someone that will approve your loan with a fair interest rate and a term that works with your budget. When we get into bad credit loans, these rules will not apply.

If you're applying for a bad credit loan, here is what you should expect:

  1. Your first issue will be getting approved. Lenders consider any FICO score below 620 as subprime. We have access to lenders that require a minimum monthly income of $2,000.00/month, 18 years of age and a current legal American or Canadian citizenship. You will need to be employed full time or have a guaranteed fixed income.
  2. Next problem will be the amount you will be approved for. With the interest rates being very high, try to keep the vehicle as practical as possible to keep your costs down. If you make all of the payments on time, your credit score will improve and you may not have to do this again.
  3. Many providers will not approve loans from private auto sellers.

Improve Your Credit Rating

Your new car loan will build your credit rating as you make your payments on time. Getting a loan for a car contributes to your credit mix and can improve your credit score. Refinancing your auto loan by negotiating with new lenders and leveraging your credit rating can reduce your interest rate and save money. Another method for building your credit quickly is a secured credit card. A secured credit card starts the process of rebuilding your credit rating. 

Searching for a Bad Credit Auto Loan Providers

There are loan providers offering bad credit auto loans. This lender has financing for new or used auto purchase, lease buyout and vehicle refinancing with 40 companies in their product offering. 

Credit Unions and Banks

We recommend that you start your auto loan process with your current bank or credit union. They know you and have a history with you.  You may have requested a credit card or personal loan in the past from your lender, but an auto loan is a bit different. The bank can use the vehicle for collateral where credit cards and personal loans are unsecured. If you do qualify, you should get the best interest rate from your current provider if your relationship is in good shape.

Credit Unions are community owned and operated by their members. We would recommend that you become a member of your local credit union regardless of qualifying for this loan. Become a member and start building history with them for your future. If you have been a member over a long period, you are already a shareholder of that Credit Union. We have found that Credit unions will make their best effort to support their members even when their credit is less than perfect. Here is a link to find a Credit Union close to you and what is required to join them.

Banks and the Credit Union will require a complete breakdown of your debt and a copy of your current income. If you are banking at the branch, they can see your paycheck deposits and how long you have been employed. They may want a copy of your tax return and pay stub. With an auto loan, you can use the vehicle for collateral which should be easier to obtain than an unsecured personal loan.

If you are unable to get a loan with your current provider because of your credit score or other circumstances, you can look at other options.

Understanding Your Credit Score

The three credit reporting agencies are Transunion, Experian, and Equifax. Lenders will evaluate your loan application based on credit score assigned based on several factors.

Credit History

The length of your credit history with different types of loans, credit cards and payments will give reporting agencies the data required to build your credit score. If you have made your payments on time with no blemishes or late payments, it provides a story for how you have executed with past loans.

If the reporting agencies have little to no information to review from history, they have no information to provide to the lenders. It makes it very difficult for the lender to do their due diligence. This is very typical of students applying for their first loan, student loan refinancing or your first auto loan.  The lenders are forced to request a co-signor. Starting at a very young age, apply for a loan or take out a cash secured credit card to start building credit. You place a small amount of cash on the credit card, then use the card until the cash is deleted then add more. 

Credit Utilization

Credit utilization is the percentage of credit that you are using monthly. Try to keep your credit utilization to 30% of what you have available. For example: If you have a $10,000.00 limit on your credit cards, try to stay below a $3,000.00 limit. This will show the lenders that you still have credit available that you are not using. 

Unpaid balances and credit cards with a large balance will affect your credit score. Having outstanding loans should not be an issue if the payments are being made on time. This shows that credit bureau's that you can manage credit. 

Payment History

The credit bureau’s track every payment that is made on every loan and credit card. If a payment is late, that is recorded for that month with the lender for credit cards, personal loans, credit lines, and mortgages.  

A simple step to ensure you never miss a credit card payment. Set up auto-withdrawal of the minimum payment on any credit card. This can be set up in two ways; if a payment is made before the minimum payment date, the credit card company will not take the minimum payment or always take the minimum payment regardless of payments being made. this will help you manage your credit score and increase your Fico score.

Credit Inquiry

There are two types of  loan applications when looking for a loan, “A Soft inquiry” and “A Hard inquiry.”

A "Soft inquiry" is when you complete an inquiry to look at your credit report or a pre-approval from a potential lender. This type of inquiry should not affect your credit score.

A "Hard inquiry" is when you’ve applied for a loan, credit card, mortgage or credit line and the lender or lenders have looked through your financial information. If you do this many times, lenders will think there are problems and it will affect your credit score. There are several steps that you can take to make sure you do not harm yourself. As an example, a mortgage broker will take one Hard inquiry with many mortgage providers at one time to save you the steps of applying with many companies. This will save your credit score. Try to do your research first where you want to apply for any loan of the credit card before you ask them to look at your credit history as it can lower your credit score.

There are several steps that you can take to make sure you do not harm yourself. As an example, a mortgage broker will take one Hard inquiry with many mortgage providers at one time to save you the steps of applying with many companies. This will save your credit score. Try to do your research first where you want to apply for any loan of the credit card before you ask them to look at your credit history as it can lower your credit score.

Try to do your research first where you want to apply for any loan of the credit card before you ask them to look at your credit history as it can lower your credit score.

Credit Types

If you have taken out a loan to pay off other loans or credit cards, the lenders will see this type of loan activity and it will look like you are having financial issues. When you are taking a loan of any type remember that big brother is watching every payment, every month.

What Will Lenders Accept as a Minimum Credit Score

Secured and unsecured loans will have different rules as it applies to your credit score. The scores listed below are for unsecured personal loans. When you apply for a secured loan, like a home or auto loan, the rules will vary with the type of collateral you are providing. With a car loan, the lender will verify the value of the vehicle and lend based on what they can recover if you default on the vehicle payment.

With a mortgage the lender with complete an appraisal on the property and depending on the value of the home, the lender may request a larger down payment to secure the mortgage if your credit score is low.  

Check your free annual credit score to find out where you are today. 

Unsecured Loan Credit Score Minimum Examples:

Some Peer to Peer lenders will take applications with a credit score starting at 580 while other Peer to Peer lenders will only look at credit scores starting at 650. 

LendingPoint will accept an application starting at 590 and will consider your Area of University Studies, Job History, and overall education.

Ondeck will take an application for a small business loan starting with a Fico score of 500.

Picking Your New Car

Are you are feeling like a lot of your choices are being made for you through this process? Your credit score is limiting where you can shop and limiting the type of vehicle that you can purchase. Here are few items that are a must to make sure you never get back in this spot again.

1. Make every payment on time and in full. Set up pre-authorized payments with the lender. If you are unwilling to do this, don't buy the car.

2. The car you are about to purchase, it needs to be just enough. This is not the time to buy a vehicle that uses a lot of gas or is flashy. Be practical. You need a number of seats in that vehicle for you and your family. The KISS method is very important through this process. (KEEP IT SIMPLE SIMON)  

3. You are still the buyer in this process and the person making the payments. Yes, you have bad credit, that does not mean that a car dealer can sell you a piece of junk or walk all over you. Take the time to research pricing on sites like and compare the vehicle the dealer is showing you. If the car is way overpriced compared to what they are trying to sell you, you need to keep shopping. The car dealers will try two things when you arrive with bad credit. They will sell you the less desirable cars on the lot and they will mark them up in price by a few thousand dollars. How do they justify this behavior? You're stuck and they know. You are a risk to them in that they may have the hassle of repossessing that car. They will hire a company to find the vehicle and tow it away. This costs the dealership a great deal of time and money to deal with the courts, get the order to take the car back and then coming looking. They do not have that issue with people that are not a credit risk. They have inventory that will not sell so they are more willing to take a risk on these cars. That is where bad credit loans come in. Mark that vehicle up a few thousand dollars, increase the interest rate on the bad credit loan and get rid of the car that they cannot sell anyway on Bad Credit Loan consumers. While this sounds awful, it creates an opportunity for people with bad credit to still get an automobile.  

4. Try to get the newest car possible. We never know how long it's going to take to get back on our feet with bad debt. One thing for sure, it always seems to take longer than we think it's going to. If you buy a 5-year-old car and you take the next 5 years to get clear of your debt, you're driving a 10-year-old car. This car is going to start costing you on all sorts of repairs over and above the normal maintenance costs. You cannot afford this extra expense. This is where buying that plain Chev or Ford with no options over a five-year-old car with all the toys becomes very important. A new car will give you about 50,000 miles on new tires and you will have completed ten oil changes. That should be the extent of your cost on a newer vehicle. Be wise in this process and get out of debt. We never want to see you back at this page again.

Tips to Watch out for When Buying a Used Car

  1. Make sure it's fully visible and dry outside when you go see the car. No rain, snow or ice. The rain will hide marks and scratches. 
  2. Look at the bumpers on the front and back. If you see gaps where the bumper meets the metal on the car, there may have been accidents. Ask for history on any prior accidents.
  3. Undercoating is a black spray that dealers will use to coat the bottom of a car. If the vehicle is older and the dealer went to the trouble to spray undercoating, we suggest you walk away from this car. Why undercoat an old car? To hide something. NEXT!
  4. Take the car for a drive. Try the brakes, do they squeak? Is the engine tapping? What happens when you start traveling over 60 miles per hour? Is the car shaking at higher speeds? Does the car drift? You can learn a lot from a test drive.
  5. When you first arrive, check under the car for any drips or leaks.
  6. Request a CarProof on the vehicle if it is available. This will tell about accident history, liens, unfixed safety recalls and also provide a used car buying guide. If you are at a dealership, they should have all of this information for you. 
  7. Check the contract carefully whenever you buy a car. Look fro any hidden fees or charges that you are unaware of. You should be provided a simple breakdown of all charges. If you are at a dealership, their finance department should walk you through the documentation.
  8. The interior smell is a big one for me. If they are using car fresheners, what are they trying to cover up? Was it a smokers car? Will that smell start to come out of the fabric after you drive away? Be aware of odors like mold or mildew from water damage.  
  9. Fight for the best price regardless of your financial position. 


Get a free copy of your credit report and make sure that you agree with the information on the report. If you find issues, here is a sample letter to dispute errors. This can be time-consuming, but well worth your effort.

If you see something on your credit score that you have forgotten or left unattended, do whatever you can to take care of the problem and get it cleared up as quickly as possible. Lenders will see this as a lack of responsibility with other lenders and consider that you will treat them in the same manner.  

Lexington Law

We have heard from many consumers that they had issues with their credit report and were having difficulty getting the vendors to reverse the problem and remove the information from their credit report. This can be very frustrating given that your current credit card rate and future interest rate charges will be based on your credit score. We were pleased to find Lexington Law and a company that specializes in this problem. 

Lexington Law is a consumer advocacy law firm and a trusted leader in the credit repair industry.  They have helped hundreds of thousands of Americans work to improve their credit by working to ensure that client credit reports are fair, accurate and substantiated. For a number of years, Lexington Law Firm has led the credit repair industry. Unmatched in credit repair knowledge, technology, and regulatory compliance, we stand alone at the top of the field. Lexington Law Firm has led the charge to bring ethical and effective credit repair services to consumers. We have assisted more clients in their fight for fair credit than any other credit repair company or firm.

Talk to your lenders and set up auto-withdrawal of every payment. Some lenders will offer small discounts for setting up auto-withdrawal.  

Once you get everything cleared up on your credit report and you feel confident that you can explain everything on your credit report and you have dealt with the issues, we would recommend that you do not apply for credit unless you are in a desperate need of capital.

If you can wait, and let your credit score increase, the interest rates offered will be lower and the number of lenders that will be available to you will increase

  1. New Credit with FICO - New Credit with FICO acquired June 2018
  2. Understanding Your Vantage Score - Understanding Your Vantage Score Acquired May 2018
  3. Car Title Loan Information - Car Title Loan Information acquired may 2018