A low credit score limits your options to refinance your car, but it doesn't mean you're doomed to live with the loan you have. Showing that you are responsibly making your current car payments can increase your attractiveness to lenders, and a check of your credit report may find that some of the entries bringing your score down aren't valid. If you're still having no luck, someone with better credit may need to step in to help you refinance.
Check your credit report to make sure your credit score isn't being dinged unfairly. If creditors have cited you for late payments when you've paid on time, write to the credit bureau where the erroneous entries appear and request an investigation. Each bureau has 30 days to complete its investigation in most cases and must remove the disputed item from your report if it can't find proof that the entry is valid. It may keep you from being able to refinance for a couple of months, but the difference fixing your report can make to your credit score may be worth the effort.
Keep Your Payments Current
If you have bad credit, it may be because you're in a financial pinch and delinquent on some of your obligations. Keep your car loan in good standing by making payments on time, even if it means being late on other bills. Lenders are more inclined to write a loan to a car owner who has remained current on his auto loan than they are someone who's already behind on payments.
Know Your Options
You're unlikely to be able to refinance your auto loan through your current lender. However, multiple inquiries for a new loan won't have a significant impact on your credit score, as long as the inquiries take place within 30 days. Shopping around is worthwhile. Depending on how much you're refinancing, a 1 percent difference in interest rates can save you hundreds of dollars, if not thousands, over the life of the loan. Steer clear of predatory lenders, who advertise their ability to provide bad-credit loans but tack on excessive fees and demand higher rates than you might otherwise qualify for.
Add a Co-Signer
Depending on your credit profile, you may not be approved for a refinance, particularly if you owe more on the car than it is worth. In that case, a co-signer with excellent credit may provide the assistance you need to secure a new loan at an acceptable rate. Any co-signer generally needs a credit score of 700 or higher and must sign the loan papers to indicate her commitment to repay the loan if you are unable to do so.