Your credit score is a big factor in determining your attractiveness when applying for a car loan, but it's not the only item that lenders consider. If you have a stable job or a stocked bank account, you'll look like a more reliable credit risk. Shop around for a better deal, and don't neglect your own bank or credit union.
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Check Your Credit
Check your credit report at least three months before you plan to finance your car. Request one report from each of the three major credit bureaus, as the information may be different in each. You can get a copy free from each bureau each year from annualcreditreport.com. These reports won't give you your credit score – that's not part of the free service – but it will show you any negative entries that drag it down. If anything's on there that shouldn't be, such as an old debt that's beyond the date it should be reported or a delinquency from a bill you paid, ask the credit bureau to investigate. If it can't confirm the debt is legitimate within 30 days, it has to take it off your record.
Live Within Your Means
When you have bad credit, you're probably not going to be able to borrow enough to get your dream car unless your income is through the roof. Instead, your purchase likely will be determined by what you can afford to borrow. New cars tend to be easier to finance than used ones, because the value of the car increases the collateral and there isn't the same risk that a buyer will find herself hammered by repair bills that will cause her to abandon her payments.
While a dealer may tout her ability to offer financing, coming into the dealership with a firm loan offer in hand helps your bargaining position. Apply for a loan from your bank or credit union, which may be willing to offer you a loan if you've been a reliable customer. Check with other lenders to see what your options are. If someone is willing to fund your loan at something other than a subprime level, that difference could save you thousands of dollars in interest over the life of the loan. You can get multiple inquiries for a car loan within a 14-day period without damaging your credit score more than a single inquiry would.
Having bad credit doesn't mean you'll be unable to make the payments on the loan – a fact you'll want to make clear when seeking financing. Bring pay stubs and bank account statements to show your earnings and savings support adding this to your budget. If you can afford to put more money upfront as a down payment, that could help. You may also be asked for references, and in a worst-case scenario you might need to ask someone close to you to co-sign the loan, which means agreeing to make the payments if you can't.