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Buying a car with bad credit

minute read

    If you’re looking to purchase a new car, then you need to start thinking about financing options ahead of time. This is when credit history becomes important if you plan to finance with a loan or lease. Lenders and dealerships will check your credit history and credit score to assess the amount of risk they would need to bear. Keep in mind, they are taking a risk each time they approve a loan or lease. So, it’s only natural for them to evaluate the lending risks — all the more reason for you to pay attention to your credit history.

    What is a good credit score to buy a car?

    To understand what credit score is needed to buy a car, you should first determine the amount you intend to borrow and the lender. Each lender will have different lending terms and policies. Some are stricter than others and will demand a higher score.

    A good credit history signals to the lender a higher chance of recovering the financed amount. You can use Chase Credit Journey® to check your VantageScore 3.0® credit score for free. You are also entitled to a free annual credit report from, an authorized website for free credit reports.

    For you, a good credit history can translate to a better chance of being approved for financing. And a higher credit score could get you access to lower interest rates, monthly payments, and more term options.

    Can you buy a car with no credit?

    This is a question that weighs on many car buyers with low credit scores or no credit history at all.

    There are various lenders who offer financing to these types of applicants. But since this group carries higher lending risks, financing may come with certain limitations.

    For example, the approved financing amount could be significantly lower for borrowers with no credit history. They also may come with less favorable payment terms and higher interest rates. This could increase the overall cost of borrowing. And the approval process could be more complex and could require additional evidence of ability to repay.

    Tips and tricks to buying a car without the best credit

    If you are looking to buy a car but don’t have great credit, here are some tips to guide you.

    Check all your options

    Instead of rushing into financing, spend enough time to research the different borrowing options available to you. Identify lenders who offer financing facilities for borrowers with credit like you and assess their lending criteria, credit score requirements, and terms. Some lenders may have higher interest rates, making the repayment difficult to afford with existing financial commitments. Or they could have lending criteria that you’re unable to fulfill at the moment. So, carefully compare and make sure you read the fine print before shortlisting your best options. 

    Make a larger down payment

    A bigger down payment can lower your borrowing requirement. This can increase the chance of approval as it signals a lower risk to the lender. It will also reduce the overall borrowing costs like interest payments. So, saving up for a down payment before shopping for cars could make a lot of sense, especially if you’re faced with a poor credit score.

    Find a co-signer

    A co-signer with good credit provides an added assurance to the lender when it comes to recovering their funds. A co-signer is someone who applies for financing with another person and legally agrees to pay off their debt if the primary borrower isn't able to make the payments. This lowers the risk of lending, making it more likely they will approve the application.

    Manage your expectations

    If you have a low credit score, the chances of borrowing will likely shrink due to the higher lending risks involved. In such situations, there are several things that may help you, like increasing your credit score, to raise the odds of getting approved.

    For borrowers who need to improve their credit score, you may need to opt for a less expensive vehicle. Being realistic about what you can afford and managing your finances is a smart idea considering interest rates and the overall cost of borrowing as well.

    Build your credit score

    Taking the time to improve your credit score is always a better option in the long term. This means you will have to start planning ahead and might even have to delay the purchase of a new car. But building your credit could increase your ability to secure credit with better interest rates and terms. A higher score can also improve your chances of securing a larger credit amount.

    Paying off credit cards, settling overdue debt, and making on-time bill payments can all help raise your credit score over time. And make sure you closely track your credit status with a tool like Chase Credit Journey®.

    Improving your credit score is probably in your best interest. Borrowers with good credit often have more options and receive better rates and terms, and it can be a lot easier once you do your homework and prepare ahead of time.

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