What it takes to meet the basic requirements of most no credit auto loans

What we can tell you

Before filling out an application for terrible credit auto loans there are some basic requirements you should be aware of.

We are familiar with all of them because for over twenty years we’ve been associated with bad credit auto sales here at Auto Credit Express. A website we created shares our expertise on issues ranging from tote the note dealers to cosigning loans as well as today’s topic, the basics of poor credit car loans.

FICO scores

To start with, you should know your credit scores. Most bad credit lenders deal in the FICO score range of 500 to 640. Anything more than a 640 is typically considered near-prime, while prime starts around 720. Although nearly all bad credit lenders loan to near-prime customers, credit unions, captive finance companies and a few banks are noted for offering these customers better interest rates.

Secondly, you can’t be a credit “ghost”. Lenders check how long you’ve been using credit. Unless you’re applying for a college grad program, having a credit history of at least 3 years is usually considered a minimum. An advantage is having at least one prior auto loan.

Income conditions

Monthly income requirements vary by lender, but a $1,500 to $1,800 gross income before taxes is typically the minimum needed to be considered. The higher your income, the larger your available selection of lenders (and cars) will usually be.

Lenders then total up your monthly debts, compare this to your income, and use this ratio to determine if you have enough income available to qualify for an auto loan plus car insurance.

Bad credit lenders also typically require that your total debt, including a car payment, not exceed 40% to 50% of your monthly gross income. In addition, most lenders prefer a monthly vehicle payment that’s less than 15% to 20% of your total income.

Down payment

Generally all bad credit lenders will require a down payment, either in cash or actual trade equity because customers with money invested tend to keep up with their monthly payments. A down payment of 10 percent is typically considered to be the minimum – with larger down payments increasing the chances of a credit approval.

Vehicles

Most bad credit lenders will not let you to have more than one car payment at a time. If you are currently financing a car, usually you’ll need to either pay it off or trade it in. You also won’t be able to finance a commercial vehicle, conversion van, motor home or anything with a salvage, rebuilt or other type of branded title.

Other policies

•    Job time – The longer the better. Short job time can be offset by situations such as higher income, employment in the same field, lengthy residence time or home ownership.
•    Bankruptcy – Bad credit lenders will typically not finance individuals with open or multiple bankruptcies. Only a few will consider someone currently in an open Chapter 13 and, even then, will require an order to incur additional debt from the court before reviewing the application.
•    Accuracy – Be prepared to back up application entries with proof. This is not the time to begin a career in “creative writing”.

Where to begin

Auto Credit Express specializes in placing customers with bad car credit with dealers that can offer them their best chance at getting approved auto loans.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

How to better your chances of getting your problem credit auto loan application approved if you receive a 1099 at the end of the year

Non employee income

If all or part of your income is as an independent contractor and you have poor credit, there are things you need to understand when applying for horrible credit auto loans.

During our twenty years of involvement with bad credit car sales here at Auto Credit Express we’ve seen what can happen if you don’t understand. It’s also one reason we built our website – so applicants could research issues such as credit scores and extended warranties as well as today’s topic, how the way you’re paid can affect your application for no credit auto loans.

1099 income

Independent contractors receive a form 1099 instead of a W-2 from their employers. This income, less expenses, is then reported on a Schedule C of the 1040 income tax form.

Rules

But just because you receive a 1099 doesn’t mean you should be. The IRS looks at three things to determine whether someone is an employee or an independent contractor:

Behavioral control – if you receive extensive instructions on how, when or where to do the work, what tools or equipment to use, what assistants to hire to help with the work or where to purchase supplies and services, you are usually considered an employee. If not, you could be an independent contractor. Extensive training on how to perform the work also might suggest that you are an employee.

Financial control – If you have a significant investment in your work, if you are not reimbursed for some or all business expenses, or if you can realize a profit or incur a loss, this suggests that you are in business for yourself and that you may be an independent contractor.

Relationship of the parties – If you receive benefits, such as insurance, pension, or paid leave, this is an indication that you may be an employee. If you do not you could be either an employee or an independent contractor. A written contract may show what both you and the business intend. This may be very significant if it is difficult, if not impossible, to determine your status.

Calculating income

Because it saves them money, independent contractors sometimes further reduce their income by inflating expenses. This reduces taxes but it can also lead to problems especially if their FICO scores fall below 640.

Traditional lenders usually don’t require proof of income but this isn’t the case with bad credit lenders.

With independent contractors, the net income that appears on a tax return is the income bad credit lenders will use to qualify for a loan.

Income issues

Most bad credit lenders have minimum monthly income requirements. The net income amount is also used to determine a debt-to-income ratio as well as to compute a car payment budget. This can affect people with 1099 income in two ways:

1.    Bad credit lenders typically have minimum income requirements of $1,500 to $1,800 per month. This means your income tax return needs to show a net income after expenses of at least $18,000 to $21,600 a year

2.    Even if you net income meets this standard, your monthly debts could be high when compared to your reported income because you actual income is really more. If it is, you won’t qualify for a bad credit auto loan.

The Bottom Line

If you’re an independent contractor and have bad credit, it’s important that you correctly report your income and expenses. Doing so will give you your best opportunity for approved no credit auto loans.

Just as importantly, at Auto Credit Express we specialize in placing applicants with bad auto credit with dealers that can give them their best chance at getting approved for a bad credit car.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

Kelley Blue Book discusses the ownership costs of cars that might make sense for credit challenged individuals with approved auto loans

What you need to know

People with bad credit must consider the total expenses of a bad credit auto loan if they want to complete the process successfully.

We understand this because for more than two decades we’ve been actively involved with bad credit auto sales here at Auto Credit Express. The website we developed reflects our experience on topics like interest rates and credit repair as well as today’s issue, choosing an affordable car once you’ve received one of the approved auto loans our dealer partners offer.

This means that once you get approved for a bad credit car you need to be aware of which ones will be more affordable to own and operate.

Kbb.com

A report on Kelley Blue Book’s kbb.com recently compared the vehicles with the best Total Cost of Ownership among cross-shopped models for both the Chevrolet Cruze and the Honda CR-V, two of the most researched vehicles on that website.

And while the CR-V as well as those vehicles cross-shopped with it is probably too expensive when financing with bad credit auto loans, both the Chevrolet Cruze and the cars that are cross-shopped against it might fit the guidelines for many credit-challenged buyers.

“With Total Cost of Ownership information, consumers can better understand the financial implications associated with the initial five years of owning a car,” said Juan Flores, director of vehicle valuation for Kelley Blue Book.  “As Kelley Blue Book’s data reveals, depending on the model’s MSRP, fuel costs and other financial factors, other models on their consideration lists could offer a greater value over time.”

Five year ownership costs

Here are the rankings of the top five vehicles, along with their five-year costs of ownership that, according to kbb.com are crossed-shopped with the Chevrolet Cruze:

Rank    Model            Five-Year Total Cost of Ownership
1    Toyota Corolla          $32,811
2    Hyundai Elantra      $34,123
3    Chevrolet Cruze       $34,705
4    Honda Civic              $36,344
5    Ford Focus                $36,591
6    Volkswagen Jetta    $36,865

Kelley also had this to say about the results:

“The Chevrolet Cruze, a most-researched car on kbb.com, has become a top-selling vehicle in its segment and for General Motors.  However, Kelley Blue Book’s data reveals that other models may offer competitive ownership costs during the initial five-year period.  On kbb.com, consumers in the market for a Chevrolet Cruze also are considering the Toyota Corolla and Hyundai Elantra.  Both models provide lower ownership costs at $32,811 and $34,123, respectively.  The Chevrolet Cruze sits in the No. 3 spot, followed by Honda Civic, Ford Focus and the Volkswagen Jetta.”

Kelley Blue Book not only utilizes their own residual values to calculate vehicle depreciation costs, it also “calculates total ownership costs for new vehicles by applying a sophisticated valuation methodology along with critical financial data from third-party providers.”

The Bottom Line

Picking the right vehicle is all-important to the successful completion of terrible credit auto loans.  The vehicle not only has to meet your requirements, it also must be affordable to own.

We hope the information supplied by Kelley Blue Book helps you in your decision process.

We also want you to know that Auto Credit Express specializes in placing customers with bad car credit with dealers that can offer them their best chance at getting approved auto loans.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

What to look for prior to signing the purchase contracts for no credit auto loans

Checking it out

Even with bad credit it’s very important knowing what to look for when signing the loan documents for a problem credit auto loan.

During the two decades of involvement in bad credit car sales here at Auto Credit Express we’ve seen what can happen if the buyer is not paying attention. This is also one of the reasons we created a website – so that applicants could study issues such as bankruptcy and credit repair as well as today’s topic, signing the purchase contract.

The finance contract

When you sign a purchase contract, you’re agreeing to the terms it contains. In most states there is no “cooling off” period so you won’t be able to change your mind later and bring the car back. This means you need to pay attention to be sure the terms the contract contains are the same as those you agreed to, including:

•    Selling Price – check to see that the price is correct. This figure should include the vehicle’s price plus tax, title and license fees. The dealer may also charge a documentation fee to process the paperwork. These fees should be broken out as to the type and amount for each one.
•    Amount Financed – this is the amount that you will be financing. It should be the selling price of the vehicle less any cash down payment, rebates and/or trade equity.
•    Contract Term – this is the length of the contract in months and should reflect the term you agreed to.
•    Interest Rate – this is the interest rate you’ll be changed. Again, it should match the interest rate you were quoted.
•    Monthly Payment – this is the amount you’ll be required to pay each month during the length of the contract. It should match the figure you agreed to.

If you disagree with anything contained in the finance contract you have the right to walk away before you sign it. If everything is correct and you sign the documents the dealer is required to give you a copy of each one you signed. Before you leave, be sure the dealer has also signed all the required documents.

As we see it

Pay as much attention to the sale and finance documents as you did in negotiating the deal. If you sign anything put in front of you without first checking it and miss something, you’re as much to blame as anyone. Taking a few extra minutes could save you a lot of difficulties later on.

We also want you to know this because at Auto Credit Express we specialize in placing applicants with bad auto credit with dealers that can give them their best chance at getting approved for horrible credit auto loans.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

Experian Automotive study shows buyers they need to check used cars carefully especially when financing with terrible credit auto loans

Our experience

Credit-challenged car shoppers need to be especially careful when choosing a used car for approved auto loans.

We should know because since 1992 we’ve been involved with bad credit car sales here at Auto Credit Express by helping applicants with poor credit find a dealer that can get them financed. A website we developed also allows contains information on topics like credit repair and bankruptcy as well as today’s issue, the importance of picking a used car with an accurate odometer hasn’t been involved in a major accident.

Used cars

For credit-challenged car buyers, a used car is typically a better choice for poor credit car loans since new cars, according to Consumer

Reports, can lose up to 47 percent of their value in the first three years.

But buying used also carries with it a risk that the car you are buying isn’t what the seller states it is. It’s even more of a problem because used cars are not covered by lemon laws and, like new vehicles, there is no cooling off period once you sign on the dotted line.

In some cases, the title that the seller shows you is only “clean” because the vehicle’s previous “branded” title was washed. In other cases, you may actually be signing a branded title without realizing what it really is.

Not only could you be buying a vehicle with hidden damage, you could also be jeopardizing your credit repair efforts.

Experian Automotive study

A recent Experian Automotive credit trends study compared vehicle history to loan performance. Here is what it found:

“…vehicle history can have a major impact on loan performance. The study found that more than 2 percent of the late-model used vehicles (model year 2005 and newer) had a negative vehicle history event (frame damage, salvage, odometer rollback, etc.), which can significantly impact the vehicle’s value.”

The study also found that “while these instances occur across all credit segments, more than 3 percent of financing outside of prime had negative vehicle history” and “Vehicles with a negative history event also referred to as “brand”, also have a higher percentage of chargeoffs for lending institutions.”

What you can do

As a buyer, there are at least three things you can do to avoid buying a car with a negative history.

1.    Go to www.nicb.org and check the vehicle’s history using VINCheck
2.    Order a vehicle history report from either Carfax or AutoCheck.
3.    If the vehicle history report is clean, have it inspected by an ASE Certified Master Mechanic.

As we see it

To successfully complete a bad credit car loan, you need to finance a car that won’t cost you hundreds or even thousands of dollars to keep running. Even if it’s reliable, a vehicle with a branded or washed title could end up costing you money at trade in time (and put off your ability to trade it in sooner).

Auto Credit Express specializes in placing customers with bad car credit with dealers that can offer them their best chance at getting approved auto loans.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

Qualifying for horrible credit auto loans if you are your own boss

Understanding the issues

If you have bad credit and you own your own business you need to understand the problems you might encounter when applying for a problem credit auto loan.

This has been a major issue for us in each of the twenty years we’ve been involved in bad credit car sales here at Auto Credit Express. It was also why we felt it necessary to create a website so applicants could study this issue as well as others such as repossession and tote the note car lots.

Unfortunately, a tote the note dealer is sometimes the only choice for self employed people with bad credit if they don’t report all their income to the IRS.

Income issues

One of the most difficult bad credit car loans to get approved is for people who are self employed.

This is because self employed individuals are responsible for keeping their own records and entering this income on Schedule C of their income tax returns.

If only part of this income is reported, it can reduce the taxes paid, but it can also prevent them from getting a car loan, especially if their FICO scores fall below 640.

Income validation

While regular banks typically don’t require proof of income, this isn’t the case with subprime lenders. Their position is that an applicant’s income must be verified with a professionally prepared tax return. If the correct income amount isn’t listed on a tax return there is no proof even with bank records supporting anything additional.

Bad credit lender rules

Most bad credit lenders require a minimum monthly income. They also use the verifiable income to compute a debt-to-income ratio in order to determine a budget for a car payment. This can affect self employed people in a couple of ways:

•    Bad credit lenders typically require a minimum income of between $1,500 and $1,800 per month. For self employed people this means reporting a minimum yearly net profit (after expenses) of $18,000 to $21,600.

•    Even if net profits meet the above requirements, there is also the chance that monthly expenses are out of proportion to it. For example, say someone reports an income of $2,000 per month. If this individual’s real actual income is $3,500, reasonable monthly expenses could be $1,800. In this case, even though the actual debt to income ratio is acceptable, the difference between reported income and actual expenses would not qualify that person for a bad credit auto loan.

As we see it

If you are both credit-challenged and self employed, you need to consider how underreporting your income would affect qualifying for a loan as well as your debt to income ratio.

If the income on your tax returns is too low or if your monthly debts are not in line with what you say you earn, than you will not qualify for no credit auto loans.

Here at Auto Credit Express we specialize in placing applicants with bad auto credit with dealers that can give them their best chance at getting approved for a bad credit car.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

How you can keep identity thieves from stealing the down payment for poor credit car loans

It’s more than just the money

We are rapidly coming into the busiest months for bad credit car sales. That’s because a large number of consumers with bad credit use their income tax refund as a down payment.

We should know because since 1992 we’ve been helping applicants with bad credit find a dealer that can get them financed here at Auto Credit Express. A website we developed also allows applicants to research topics like repossession and interest rates as well as today’s issue, identity theft.

Income tax refunds

The idea of using your income tax refund for the down payment on a new car is a great idea. Of course, we’re in the car business so why wouldn’t we think that? But no matter what you plan on using your tax refund for, we also want to be sure that, number one, you get your refund and, number two, you don’t share your personal information with an identity thief.

That’s why we want to share with you some information from DigitalPersona regarding some common sense tips you can follow with many of your online accounts both during and after income tax season. So here they are:

•    Use strong, unique passwords for all your online accounts.  Having a single password for multiple sites increases your risk of identity theft.  Not sure how secure your passwords are?  At-a-glance password rating systems will let you know in moments whether you are truly protected.

•    Safely keep track of passwords, especially those that aren’t used very often.  Don’t write them down on “sticky notes” or leave them in an unprotected file on your computer.  Today’s cyber thieves specifically search files and the places where browsers store “remembered” passwords.

•    Ensure that only you can use your passwords by tying them to your fingerprint.  Fingerprint readers are already available on over 30 percent of laptops and can be easily added to any PC.

•    Protect against phishing attacks hidden behind false tax preparation or bank Web pages.  Look for “hacker proof” or “secured” symbols on the Web site before logging on.

•    Encrypt important personal files, such as tax returns or other sensitive documents, to safeguard against hacking attempts.

•    Keep all anti-virus, malware, and other computer security products up to date to remain on top of the latest Trojan, “keyloggers” and other threats.

•    Secure yourself, not just your PC.  Seek out software that specifically protects you when your personal identity information is handed to authorized web sites.

According to Jim Fulton, Vice president of marketing at Digital Persona, tax season is “a time when we all need to take extra care of our online identities. Our complete financial lives are handed over to Web-based tax preparation sites, which do take strong measures to keep information secure. But, it is up to each of us to keep this confidential data safe on our own PCs and to protect our online tax accounts against hackers.”

As we see it

Using your tax refund to buy a car is a great idea. But no matter how you plan on using it, we want to make sure that you get it. By following the steps outlined by DigitalPersona, you’ll be able to enjoy your refund and, at the same time, guard your personal information against identity theft.

You should also know that at Auto Credit Express we specialize in placing customers with bad car credit with dealers that can give them their best chance at getting approved for terrible credit auto loans.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

FICO answers a few questions that might be of interest to credit challenged consumers applying for horrible credit auto loans

You should know

As someone applying for a problem credit auto loan you need to understand how credit scores work.

We understand the need for this because we’ve been a part of bad credit car sales for twenty years here at Auto Credit Express. As a result of this involvement, we even created a website so consumers can research such issues as gap insurance and child support income as well as today’s topic, FICO scores.

One of the best sources to explain credit scores would certainly be the people from FICO, who not long ago conducted a joint “TweetChat” with Bankrate.com.

Here are a few of the questions and answers from that session that should be of interest to anyone applying for bad credit auto loans:

TweetChat questions and answers

Does my credit score determine whether I get credit?

Your score will likely play a big part in that decision, but lenders won’t all view your score the same way. That’s because lenders have different tolerances for risk. Some lenders will require a higher score than others do for the same basic credit product. Also, lenders often will consider other information in addition to your score as they make their decision. This can include information from your credit application (such as income, length of time on your job, own vs. rent), any prior credit experience you have had with that lender, and the value of the property (auto or real estate) you want to buy.

What can I do to significantly improve my credit score in the next couple of days?

There are no quick fixes when it comes to improving your credit standing. Getting a good FICO® Score is the result of maintaining responsible credit habits over time. The most import of these habits are:

• Pay your bills on time
• Keep any credit card balances low
• Apply for new credit only when necessary

You also should check your credit reports for accuracy. You can get your reports for free once each year from www.annualcreditreport.com.

Does checking my own credit report or credit score hurt my FICO Score?

No. When you check your own FICO Score or credit report, the resulting inquiry on your credit report is ignored by the FICO scoring formula and will never hurt your FICO Score.

Are the FICO Scores sold to consumers by myFICO.com an approximation of the score lenders see?

FICO Scores sold by myFICO.com are precisely the same scores used in credit decisions by thousands of U.S. lenders and other businesses, large and small. Other websites may sell scores that imitate the FICO Score in look and feel, but they use different formulas, have different score ranges, and may mislead people into taking inappropriate actions with their credit. Genuine FICO Scores are always clearly labeled as such.

The Bottom Line

Understanding how credit scores work is an important step in your credit repair.

Another important step, if you need a car and have bad auto credit, is that at Auto Credit Express we specialize in placing our applicants with dealers that can give them their best chance at getting approved for a bad credit car.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

One of the typical requirements for approved auto loans with bad credit is a list of references

We understand

When financing with poor credit car loans, chances are you’ll need a list of references.

If you want to know why we know about this it’s because since 1992 we’ve been involved with bad credit auto sales here at Auto Credit Express. Along with an application, website also features a resource section so car buyers can research topics like free credit scores and military discounts as well as today’s issue, with the documentation requirements of terrible credit auto loans.

Loan documentation

In addition to the typical documents needed for an auto loan such as proof of insurance and a signed credit application, bad credit lenders usually add additional items, called stipulations (“stips”) that are required for a bad credit car loan.

Typically, one of these requirements is a list of references.

Your references

A reference is simply someone who knows you. This individual can be a relative, friend, co-worker, or even your boss.

Typically, six references will meet the needs of most subprime lenders. Although many will ask for only four, there are a few lenders that may require more so it’s usually a good idea to have at least six available.

Information needed

In addition to the individual’s name, you’ll also need to supply their address and phone number (either home or work).

A tip: In order to save time for both you and the dealer’s finance manager, you’ll want to bring the list with you on your first visit.

One more thing: Before putting anyone to the list, be sure to ask their permission to use their name as well their address and phone number. Also, let them know that during the verification process they might be contacted by the lender in order to confirm that they know you.

As we see it

It’s a good idea to have a list of 6 references with you – complete with their addresses and phone numbers – when you visit the dealer for the first time. When you do this the application process moves along more quickly and more smoothly.

Meanwhile, at Auto Credit Express we specialize in placing customers with bad auto credit with dealers that can give them their best chance at getting approved for bad credit auto loans.

So if you’d like us to assist you in getting your car credit back on track, you can begin now by filling out our online auto loans application.