Bad Car Credit Chicago
Bad things sometimes happen to good people. With the economic challenges Chicago residents have faced in recent years, these bad things have sometimes resulted in late payments, repossessions and even foreclosures. The end result? An abundance of bad car credit needs in Chicago. However, even if your credit score has suffered in the past, this doesn’t mean the car of your dreams is out of reach. The following will help you understand what factors lead to bad car credit in Chicago, as well as what can be done to still secure an auto loan, despite your bad credit.
The determiner of whether you have good or bad car credit is your credit score, also referred to as your FICO score. Your credit score isn’t just about your ability to pay for a car loan right now, or your recent payment history on your loans and credit cards. Your bad car credit could be from activities that happened as many as seven years ago. If you had late payments or a repossession as far back as seven years, this will show on your credit report and will negatively affect your credit score. Only time (for these items to fall off your credit report) and a continued current history of paying your bills on time can help rectify this bad car credit in Chicago.
Credit scores range between 300 and 850. Most people average a credit score in the 690s. For those with stellar credit in the high 700s, lenders are eager to work with these borrowers, as they indicate a low credit risk. However, most people don’t fall into the category. A score of 620 is often considered the cut-off between “good” and “bad” credit. Below a 620 and you won’t qualify for the special teaser interest rates that car manufacturers offer. However, there are still options for those who fall into the bad car credit category in Chicago!
A large down payment often gives a lender the incentive to take the additional risk of a bad car credit loan. Chicago car buyers who have shown the lender they too have a financial stake in the vehicle often can counteract a bad credit score. If the vehicle is worth significantly more than the amount being financed, due to a large down payment, this helps mitigate the risk due to the poor credit score.
Additionally, a lender may be willing to take the additional financial risk of a loan for bad car credit in Chicago, for a higher interest rate than what they would charge low-risk buyers. This higher interest rate can be as much as three times higher than current “good credit” rates, which makes shopping around for a loan even more important for bad car credit Chicago car buyers, than those with excellent credit.
As a last resort, bad car credit Chicago car buyers may want to check out “buy here/pay here” car lots. These dealerships specialize in working with buyers with bad car credit. Instead of turning to a 3rd party lender to finance the loan, these dealerships handle the loan in house. One thing car buyers should be wary of, however, is the higher costs associated with buy here/pay here facilities. These dealerships often have higher prices on their vehicles, as well as very high interest rates. Like traditional lenders this increased financial incentive helps them mitigate the risks with loaning money to those with bad car credit.
