With so many cars currently being bought on finance, be it via a car loan, lease or some other arrangement, having a good credit rating before heading to new car dealerships is more important than ever. But what if you currently have poor credit? Can you buy a car with poor credit?

The answer to that question is yes, you can, but there are definitely limitations and obstacles to overcome before you do it. In today’s blog, we’ll explore the topic of buying a car with poor credit.

The first thing to remember is that there are some realities you must face up to when you buy a new car on finance with poor credit:

  • You will have to shop in a different way to those with better credit.
  • You will have to accept higher interest rates and deals that appear unfair.
  • If the above two don’t appeal to you, then you will have to put in time and effort to change your credit score before you go to purchase a car.

Shopping Differently: Buying a Car with Poor Credit

The reality is that while many with good credit can just pick the car they want and count on the best finance deal and interest rate to come through, those with poor credit cannot do that.

When buying a car with poor credit, you first need to be aware of possible interest rates. Use car finance calculators that can factor in your credit score and give you a prediction of what kind of monthly payments and interest rates you’d be offering. Local car dealerships might also include it in their own finance calculator.

Besides doing your homework on interest rates, you can also try to save up some more cash and offer a larger downpayment. If a good-credit customer is offering 20 percent as a downpayment, but you can offer 25 or 30 percent, then you already improve your standing and credit with the dealership or auto loan provider.

You may also be able to get preapproved for a car loan outside of the dealership so that you can go to a dealer knowing exactly how much you have to spend. This also helps you avoid the awkward or humiliating prospect of being turned down while you’re trying to buy the car.

Improve Your Credit Score

By far the best strategy when you’re trying to buy a car with poor credit is to put off the car buying date and first work on building your credit up. Despite what you may have been led to believe, it’s easier than you think to raise your credit score and it can be done in a shorter time than you imagine. With six months of application, effort and financial discipline you can move up at least one whole bracket in the credit scores. That will not only lower your interest rates but also will show you on a positive trajectory and help you get guaranteed for bigger, better loans.

Determine What’s Impacting Your Credit the Most

The first step to boosting your credit score is to work out why it is that your credit score is bad. The most common reasons for a credit score being low include the following:

  • Late payments on bills and credit cards – this accounts for 35 percent of your credit score.
  • Defaulting on debt payments and loan payments
  • Filing bankruptcy
  • Going through a property foreclosure
  • Criminal judgments
  • You’re frequently opening and closing lines of credit
  • You run high balances on one or more credit cards
  • You charge your cards close to maximum and then pay them off

The last one can sound strange, but it’s true. Lenders much prefer those who don’t play brinkmanship with their credit. Once you have found out what it is that’s causing your poor score, then you can start work on fixing it.

If you’re using your credit too much and not able to afford the repayments, then tip the balance the other way temporarily and ensure that you have more flowing into your credit card account than coming out. When banks see this positive trend, they will rank you more highly in credit.

Don’t procrastinate on bills. Pay them as soon as they come in and that will help greatly with your score. This is the same for credit card bills. Sometimes it pays to just charge small but meaningful amounts onto the card and then pay off the balance when the request comes in. This demonstrates someone who is in control of their money.

Don’t Close Off Your Current Lines of Credit

This one seems counterintuitive to some, but it’s true. As we mentioned above, those who open and close different lines of credit end up with worse scores overall. It’s a better policy to keep your current lines of credit open, pay down their balances and then use them in a reasonable and manageable way. If you have existing cards, keep them open and use them for things you know you can afford. This positive activity will boost your score.


In the end, if you currently have poor credit but you want or need to purchase a car on finance, then there are sacrifices to be made and processes to go through first. If you can practice the financial discipline that we describe above, the best car deals on new-car financing will come your way.

There is also the option to buy a car used. If you go with a used car, then the prices are lower to start with so even with higher interest or less favorable terms on the loan you can likely afford it. Make those car payments on time and your credit score will also boost so that a few years down the line you can get something a lot better. Be patient, make payments, keep lines of credit open and stay the steady course. Sooner or later, you’ll get where you need to be.


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