Buying with Low Credit

Many people these days have faced situations in their lives which present credit challenges. These situations include such things as missed or slow payments, bankruptcy, defaulted loans or other financial obligations, and civil court judgments to name a few. While these types of credit challenges are not uncommon, it can make it difficult to obtain the financing that you need to procure dependable transportation for yourself or your family.

Second chance financing, also referred to by many as “bad credit financing” is often the best solution in these types of cases. Second chance financing offers the opportunity for the purchaser to obtain a dependable vehicle while at the same time re-establishing his or her credit. However, for the desired effect of credit repair to occur, it is important to make sure of several items.

First off, be sure of your ability to make the payments each month. Do not overextend yourself or overestimate your ability to make payments. Remember, baby steps here. Take baby steps to rebuild your credit, and do not risk further damage by committing yourself to more than you can afford. You do not want to miss or be late on a single payment once you begin to re-establish your credit.

So the effect of this on the person trying to rebuild their credit is twofold: first off, it is disheartening. Secondly, and more important for purposes of rebuilding credit, this type of a credit application usually results in the submission of credit inquiries from multiple sources in an attempt by the dealer to get you financed. Each credit inquiry knocks your score down a few points, whether or not credit is extended to you. So, just one application at a dealership may result in up to five inquiries on your credit report. This hurts.

Therefore it is important to look for a used car dealer with in house financing, such as the “buy here – pay here” type of dealer. This dealer, you know, will individually finance you out of their pocket without repeated submissions to lenders for the purposes of obtaining third party financing. One credit inquiry is much better than five.

However, not all buy here – pay here dealerships are the same. It is absolutely imperative that the dealer offering second chance financing report to at least one of the major credit bureaus. Many of these dealers will not make such monthly reports, and so even if you make your payments on time each month, it does nothing for your credit. Yes, you have a car, but your credit report remains unchanged.

Ask your second chance financing dealer if they report to a credit bureau. Make sure they do. This way, each month when you make your payment you are building a credit history. Over time, your credit score improves and potential lenders can see that you have established a responsible payment history with a reputable lender.

About the Author: Greg Chapman of Greg Chapman Motors is a knowledgable and leading profider of used cars, trucks, and SUV’s. Since 1959, Chapman motors has offered reliable used cars in Austin and the surrounding area. For more information please visit http://www.gregchapmanmotors.com.