CREDIT PROFILE

Know your credit profile before applying for an auto loan.

For the most part, Liberty Auto Loan can generally help you get the car loan or bad credit auto loan you need regardless of your credit profile. Through the Liberty Auto Loan “Consumer Connection Program,” we can connect you with a lender or dealer affiliate partner who specializes in helping people with poor credit get a quality loan for the car they need. Take a look at the following examples to determine your general credit profile and the type of car loan you may need as a result of that profile.

Good Credit

Typically, consumers who have “good credit” will show a three-year, or longer, record of having “paid as agreed” in their credit profile regarding their borrowing. It is important to note that items such as “unapplied for,” and other similar derogatory items on your credit report including civil judgments from non-creditors and medical bills, are often ignored in the evaluation process of your credit profile. However, if you have a bankruptcy, repossession, or loan default on your record… it will typically show up for a number of years. It is for this very reason that keeping a solid credit history is critically important to financial security.

Fair Credit

In general, consumers with “fair credit” will show a credit history record of “paid as agreed” for at least the past two years. Fair credit consumers may have an occasional late payment that shows up on their record. If you have a credit record that shows “paid as agreed” installments for a mortgage or auto loan, within the last two years, you should have good revolving credit. And as noted above, a repossession, defaulted loan, or bankruptcy on your record will show on your credit for a significant amount of time and affect you. In order for you to have a fair credit rating, any and all defaulted loans, repossessions, and/or bankruptcies should be at least 18-months to two years in the past.

Situational Bad Credit

Often times, some bad credit rankings are not viewed as negatively to a lender as other bad credit rankings. This includes consumers that have situational bad credit problems. In the case of situational bad credit, you can usually identify a specific (and significant) personal event or economic disaster that led to, and caused, the bad credit situation. A couple examples of this scenario can include:

• A divorce or marital separation.
• Major illness or physical injury.
• Medical problems that led to credit issues and/or bankruptcy.
• Significant unemployment from a long-standing job.

For obvious reasons, these items tend to be given a more favorable lender evaluation IF you had “good credit” prior to the event leading to the decline. In this case, the lender may assume that you are really a fair credit risk and not a poor credit risk.

Bad or No Credit

 In the case of bad or no credit, we are referring to consumers with little or no applied for credit or consumers that have a significant number of charge-off accounts that include: unresolved repossessions, unpaid utility bills, unpaid charge accounts, unpaid medical bills, and other financial items that indicate to a lender that the consumer is a poor or bad credit risk. If you are in this situation, you really need to evaluate your financial situation and change your habits. Failing to do so will get you trapped in a cycle of bad credit in which you may never be able to improve your credit situation. In the case of having no credit, an auto loan can help you begin to establish a credit history. However, you may need a cosigner in order to qualify for the financing.

Really Bad Credit

Generally speaking, consumers with “really bad credit” have significant credit problems that cannot be tracked to a single cause or event. Simply put, these consumers have a long-term history of really bad credit and borrowing behaviors. Some examples can include:

• A history of multiple bankruptcies.
• A history of writing checks that bounce (bad checks).
• A number of recent repossessions that are less than a year old.
• A record of significant bad credit following a bankruptcy.
• A current record of substantial delinquencies on all (or most) existing obligations and debts.
• A number of repossessions outside of bankruptcy and at different times.
• A record of multiple charge accounts containing charge-offs.

Consumers continuing in this behavior will end up with virtually no chance of obtaining credit. And if they are able to obtain credit, it will come at a significant cost – very large down payments and exceedingly high interest rates. As stated earlier, if you wish to get back on the track to a more stable credit situation… these habits MUST change.

Knowing Your Credit Profile

Knowing your credit profile, and having a solid grounding in basic financing principles, can assist you in understanding exactly what the lender is looking at, and making a decision on, when evaluating you for a car loan or bad credit auto loan. Wherever possible, you should make changes in your lifestyle to improve your credit standing. After all, being financially responsible is the best way to get the loan you want at an interest rate you can afford.

myFico.com has a Loan Savings Calculator that can show you just how your FICO Score (or Credit Score) impacts the interest you have to pay on an auto loan or bad credit car loan.

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