How to Buy a Car With Bad Credit

••• Jupiterimages/Pixland/Getty Images

Most people purchase cars with an auto loan through the dealership, bank or other financing company. These loans are approved primarily based on the applicant's credit score and income. Buying a car with bad credit is challenging because traditional lenders are likely to deny the loan application. If you have bad credit but need to purchase a car, save up and pay cash or try to obtain an auto loan.

Order a copy of your credit report and score. The three major reporting bureaus, TransUnion, Equifax, and Experian offer reporting services on their websites.

Review the report in detail and look for any mistakes. Contact the reporting bureau immediately if you find a mistake to have it corrected. Removing false information from your credit report improves your score and makes the overall report look better to the lender.

Research auto-loan lenders for the best rates. Credit unions usually provide auto loans at good rates. There are lenders other than dealerships but their interest rates may be high.

Save money for a down payment. A cash down payment lowers the amount you need to finance.

Apply for the loan by yourself. If you are denied, ask a trusted relative or friend with good credit to be your cosigner. The cosigner is financially responsible for the loan if you stop making payments and his credit is affected, as the loan shows up on his report as well as yours.


  • If you don't need a car immediately, work on improving your credit score as much as possible before you apply for the loan.


  • If you have a low credit score, lenders are likely to charge you a higher interest rate than someone with a good credit score because of the greater risk of approving your loan.