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What To Have In Place Before Obtaining Vehicle Financing

15 December 2015

Bobbie Jones

If you're in the market to purchase a used vehicle, one of the first things you'll have to get is auto financing. Many auto dealerships and car sales lots offer an array of incentives that include guaranteed financing for your auto loan. While it may be easier to get financed through one institution as opposed to another, there are still requirements you must meet before you'll ever get approved. Make sure that you're prepared and ready before heading to the dealership by having these things in place first. 

Reliable Income Source

When filling out an application for auto financing, one of the first questions that you'll be asked includes information about your income. This could be from an employer, child support or through another consistent income source such as social security. If the amount is consistent and has been for at least the past 12 months or more, it will be beneficial to your application status. The reliability of the income type, as well as the overall amount, will help determine your interest rate and your monthly payment. If you are self-employed or a seasonal part-time worker, you may be required to obtain a co-signer on your loan.

Accounts In Good Standing

One thing that most lenders will look at when underwriting your auto loan is the accounts you currently have in good standing. When you apply for an auto loan through a bank, credit union or the dealership, the lender will run your credit report. Typically, it's a merged report obtained by all three credit bureaus:

• Experian
• TransUnion
• Equifax

A detailed report shows exactly how much debt you have, as well as old accounts that have been closed. A summary will reveal all of the accounts that you have in good standing and are being paid on time. If you have delinquent accounts or credit cards that have been turned over to a bill collector, this will hurt your chances of getting a good interest rate on your used car loan.

Good FICO Store

In addition to a credit report, some lenders look at your FICO score first. Your FICO score is a number between 300 and 850 that combines several things from your credit report including:

• Length of time revolving accounts have been opened
• Number of closed accounts and bankruptcies
• Payment history
• Amount of debt-to-income ratio
• Number of current credit report inquiries from other businesses

All of these are contributing factors in what your FICO score will be. Anything over 700 is generally considered good to excellent credit. Anything below that can be listed as derogatory on your credit history and reduces the likelihood of getting auto financing.

Bankruptcies or Repossessions At Least Five Years Old

If you've had problem credit in the past, including a vehicle repossession or a bankruptcy, it will likely show up on your credit report if it's less than ten years old. If you have a recent auto repossession, it may be challenging to get a bank to back your loan. Auto financing companies that offer guaranteed loan approvals may lend to someone with bad credit and a previous bankruptcy, but the interest rate and penalties could be high.

Taking your overall credit history into consideration is important before seeking out auto financing (from an outlet such as Leopardi Auto Sales). Be prepared to show that you are currently in good standing with all of your accounts and that you're ready to take on the responsibility of paying your new automobile loan on time.  

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