How to Rebuild Credit to Purchase a Car

Bad credit makes it hard to get car loans, whether you have minor problems like a string of delinquent payments or more serious issues like collection agencies hounding you or a recent repossession or bankruptcy. FICO, the largest credit score firm, explains that you must follow the same steps to rebuild your credit, regardless of why it is damaged. You can qualify for a car loan if you are willing to get your finances back on track.

• 1

  Catch up any delinquent accounts and stay current on all of your bills. Slow or missed payments make lenders shy away because they don't think you can handle a car payment if you are already having trouble with other bills. Build up your on-time payment history for as long as possible before applying for your car loan.

• 2

  Pay as much money as possible on your high-balance bills to bring down the owed amounts. High debt harms your credit score. You do not have to close your old credit cards and other accounts. You only need to reduce the outstanding balances to a reasonable level so you have enough buying power for a new vehicle loan.

• 3

  Save up a substantial down payment to use toward your new car. Lenders are more likely to finance a lower amount if your credit is borderline because it reduces their risk.

• 4

  Order your credit reports and check them for errors that might be hurting your credit score unfairly. All three credit bureaus accept online disputes if you find problems like up-to-date accounts listed as delinquent, incorrect balances or accounts that do not belong to you. They are required by the Fair Credit Reporting Act to remove unverifiable information if you dispute it.