Getting approved with damaged credit: what lenders actually weigh

People with credit problems often assume the score is the whole story, apply everywhere at once, get declined repeatedly and conclude they cannot buy a car. Usually the problem is not the score. It is the shape of the application around it.

What subprime auto lenders look at

In rough order of weight:

1. Time at current job and income stability. Two years somewhere steady beats a higher income started last month. Self-employed applicants need two years of returns or twelve months of bank statements.
2. Payment-to-income ratio. Most lenders want the car payment under 15% to 20% of gross monthly income. This is often the actual reason for a decline.
3. Debt-to-income overall. Rent or mortgage plus existing obligations plus the proposed payment.
4. Down payment. At the lower tiers this is the single biggest lever you control. Going from nothing down to $2,000 down frequently changes a decline into an approval, and often improves the rate tier on top of that.
5. Previous auto loan history. A prior car loan paid on time carries disproportionate weight, more than credit cards.
6. The vehicle itself. Lenders cap advance against book value, and many cap age and mileage. A cheaper, newer, lower-mileage car is easier to get financed than an expensive older one, even at the same payment.

What to do before you apply

• Pull your own credit reports and dispute anything wrong; it happens more than you would think
• Do not open new accounts or close old ones in the sixty days before applying
• Gather documents: licence, two recent pay stubs, proof of address, proof of insurance, references
• Decide a realistic payment before you fall for a specific car

About rate shopping

Multiple auto loan enquiries inside a short window count as one enquiry on all major scoring models. Shopping your loan does not damage your score. What does damage it is applying scattershot over months.

How we handle it

One application from you goes to several lenders at once. We tell you before we submit what we expect to come back, so you are not blindsided. And if the honest answer is that waiting three months and saving another $1,500 will save you far more than that in interest, we will tell you that too.