How To Get A Car Loan With Bad Credit In 6 Steps

Infographic of someone looking into a car loan with a low credit score

Your vehicle is one of your most expensive assets, so it’s important to take good care of it. Unfortunately, even the best vehicles don’t last forever. If it’s time for a replacement, it can be tough to qualify for financing if you have any blemishes on your credit history. This guide explains how to get a car loan with bad credit in a few simple steps.

What Is Bad Credit?

When someone says they have “bad credit,” it means they have a low credit score. Lenders pull your scores when you apply for credit cards, personal loans, mortgages, auto loans and other types of credit accounts. According to the Federal Trade Commission, a high score usually falls in the 700 to 850 range. Poor credit scores range from 300 to 579. These are some of the most common reasons for having bad credit:

  • Late payments
  • Missed payments
  • Charge-offs
  • High account balances
  • Too many accounts with balances

6 Steps To Get A Bad Credit Car Loan

Infographic of a woman looking into getting an auto loan with bad credit

If you don’t have a stellar credit score, you may not be able to get a traditional car loan, but don’t despair. Many lenders offer bad credit card loans to help buyers who are working to improve their financial circumstances. If you’re interested in getting a bad credit car loan, follow these steps to improve your chances of approval.

1. Pull Your Credit Reports

Before you can plan for your future, you need to know exactly where you stand, so the first step is to pull your credit reports. If you’re not familiar with the term, a credit report is a document that outlines your credit history and helps lenders understand if you have the resources to manage credit wisely.

In the United States, the three main credit bureaus are Equifax, Experian and TransUnion. To truly understand your financial situation, you need to get a copy of your report from each organization. You can do this by going to and filling out the request. Under federal law, you can typically get one free copy of each report per year.

2. Request Your Credit Scores

Unfortunately, your reports don’t come with credit scores, which means you need to obtain the scores separately. Although many companies have credit scoring models, the scores produced by Fair Isaac Corporation (FICO) are widely used by lenders. You can purchase your Equifax, Experian and TransUnion scores on or get them as part of a membership. Many banks and credit card companies also offer free credit scores to their customers, so check to see if that’s an option. Just note that these free scores may or may not be FICO scores.

3. Gather Documentation

One of the best ways to get a bad credit car loan is to prove that you can afford to make monthly payments. To do this, gather the following documentation:

  • Proof of Income: Find every document you have that helps verify the amount of money you earn each month, such as pay stubs or profit-and-loss statements from a business you own.
  • Proof of Employment: Lenders feel a little more confident about letting you borrow money if they know that you have a steady source of employment. Make sure you have pay stubs, W-2 forms or other documents to show where you work and how long you’ve worked there.
  • Payment Information: If your credit report shows any late payments, prepare a letter explaining what happened. A lender may be willing to give you a bad credit car loan if you can show that those late payments are in the past and occurred due to circumstances that have since improved. For example, if you were going through treatment for a medical condition, you may be able to explain that you missed some payments due to missing work for treatment.
  • Credit Account Information: Creditors only update your accounts once per month, so it’s possible to pay off a debt and not have it reported to the credit bureaus for a few weeks. If you apply for an auto loan during that period, the lender may see your account balances and think you don’t have enough money to make regular payments. If this applies to your situation, make sure you have proof of payment, such as an account statement showing a $0 balance.

4. Reduce the Amount You Need to Borrow

You may improve your chances of approval if you ask for a lower loan amount. To do this, you have three basic options:

  1. Trade in your current vehicle. If you trade in a car or truck, the dealer will give you credit for the trade-in value, reducing the amount you need to borrow.
  2. Choose a less expensive vehicle. It would be nice if everyone could afford a cool convertible or a luxury SUV with all the bells and whistles, but that’s not how things work. To reduce your desired loan amount, look for a vehicle with a lower price.
  3. Save up for a down payment. The more money you have to put down, the less you’ll have to borrow.

5. Find a Cosigner

Your preferred lender may require a cosigner, which is a person who agrees to take responsibility for the loan if you fail to repay it as agreed. In many cases, the cosigner is a family member or a close friend. If you go this route, make sure you can afford to make the monthly payments on the vehicle. Otherwise, the cosigner may end up on the hook for your loan, which is likely to sour the relationship.

6. Compare Lenders Carefully

Not all lenders offer the same terms and credit programs, so compare multiple options before you sign for a bad credit car loan. Compare interest rates, fees, vehicle availability and other terms to make sure you get the vehicle you want at a price you can afford.

Other Options

Although some lenders are more forgiving than others, not every applicant is approved for a bad credit car loan. If you’re denied, there are a few things you can do:

  • Save up more money. If you applied for a loan with a small down payment, try saving more money before you try again.
  • Work on improving your credit. Low scores make it difficult to get approved, so unless you need a vehicle right away, you’re likely to benefit from waiting a few months to reapply. You can boost your score by making all payments on time, paying down as much debt as possible and arranging to pay accounts that have been charged off.
  • Adjust your expectations. The more you want to spend on a car, the more difficult it is to get approved. If you’re willing to get a used car instead of a new one or choose a less expensive model, you may qualify for a bad credit car loan the next time you apply.

Your credit score is important, and unfortunately, it takes time to build it up to a number you’re proud of. Luckily, you don’t have to wait until you have an ideal credit score before applying for a car loan. Many lenders provide bad credit loans. It’s also never too late to begin repairing your score. So once your loan is complete, take the right steps to ensure you go into your next loan with confidence. 

You might also be interested in: How To Secure The Best Auto Loan Rate [5 Factors To Keep In Mind]

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