How to Buy a Car with Bad Credit

Updated on April 9, 2024

Potential big-ticket buyers will tell you how vital a good credit score is. A car is a big-ticket item and requires a significant investment. In such cases, good credit ensures you get access to cash quickly to purchase the vehicle. But what if you have bad credit? Is it the end of the road for you? Definitely not. In this article, we explain how you can still get your dream car even with a bad credit score.

What Is a Bad Credit Score and Why Does It Matter?

Before we explore how to buy a car with bad credit, let’s understand what bad credit actually means. Credit is a numerical value that describes your creditworthiness, i.e., how responsible you are towards your debts and how often you pay them off on a timely basis.

The value is calculated by credit reporting bureaus like Equifax, TransUnion, and Experian. Based on several factors, they assign you a value anywhere between 300 and 850.

A good credit score is anywhere between 740 and 850. An average credit score is anywhere from 580 to 739. Anything below 579 is considered a bad credit score. These are FICO credit scores. There is also a CIBIL credit score, which is similar.

A bad credit score means you’re less creditworthy. Very few companies would be open to doing business with you. Therefore, when you apply for a loan, the lenders willing to give you a car loan will be fewer in number. Even if they do, you’re likely to incur a higher than average interest rate.

Therefore, buying a car with a bad credit score is a bad idea.  

Can You Buy a Car if You Have Bad Credit?

Even if buying a car with bad credit is discouraged, it is still possible. You can still get your hands on a new car.

The best way to buy a car with bad credit is to pay the amount in full. This way, you’re not applying for a loan, and bad credit won’t matter. The car dealership will not ask for your credit report if you are paying in full. But if that’s not a possibility, you can still get a car. In the next section, we recommend a few options.

11 Tips for Buying a Car with Bad Credit

If you want a car immediately, even with bad credit, there are a few things you should try before you apply for that car loan. Here are the top 11 ones:

Improve Your Credit Score

Before applying for a car loan, check if you can improve your current credit score. This will directly increase your chances of getting approved for the car loan. Contact a credit repair agency and request help with improving your credit score. But this is a lengthy process and can take between three and four months. If you have a pending loan, try clearing it off. This will automatically have a positive impact on your credit score.

Don’t Do Anything That Could Decrease Your Score

When you have a bad score, the last thing you’d want is to go from bad to worse. This would essentially close all doors for you. Therefore, you must first understand the issues that are hurting your credit score.

Do you have a pending credit obligation? Try clearing it at the earliest. If you’re making late bill or rent payments, get on track and pay at the earliest, before the deadline. These steps would at least ensure your credit score doesn’t go further down.

Understand and Check Current Interest Rate

As mentioned above, you can find a lender who will offer you a car loan even with a bad credit score, but typically at a higher interest rate. If you’re willing, you can accept the higher rates, but you shouldn’t accept substantially higher rates, which would create financial problems down the road. Therefore, it’s better if you have an understanding of the current interest rates on car loans.

Save Up for a Bigger Down Payment

The best way to purchase a car with a low credit score is to reduce the loan amount size. In other words, you need to make a big down payment. If that’s the case, then the car dealer might recommend you for a car loan, which would make the entire process easier.

Be Realistic About What You Can Afford To Pay

Many car buyers fail to have realistic expectations of what they will be paying for the car. But car prices vary significantly, influenced by multiple factors. Therefore, research is very important when buying a car and looking for car loans. It’s better to be as accurate as possible.

Skip the Extras

Car dealers tempt you by offering extra features that come with the car. But these also come with a price and aren’t free. When you have bad credit, you should skip the extras, however useful they might seem to be. Even if you get approved for a loan, you should stick to your budget instead of raising the cost.

Get Pre-Approved for a Loan

Getting pre-approved is easier than applying for the loan and then getting approved. Usually, banks have loan amounts which they pre-approve to certain customers, even before they apply. You must get in touch with your bank or credit union to check if you have a pre-approved loan amount.

Look Into Financial Aid Resources

Some states have programs that offer financial aid to low-income individuals. Therefore, you can look for such programs and apply to see if you can receive the benefits. Financial aid can be used for your down payment or help pay the loan, which can improve your credit score.

Read All of the Paperwork Twice

When entering any financial transaction, you should read all the paperwork and the attached terms and conditions. It’s not uncommon for people to sign contracts that have hidden fees. This not only damages your credit score but increases the financial burden on you. Only sign the documents once you have read, understood, and agreed to the terms.

Don’t Buy With the Intention of Trade-In Later

If you’re buying a car with a low credit score, then you must be willing to have it for years or decades. Trading it in too early, especially when you have pending dues and a bad credit score, will worsen your finances. Remember, a car is a big-ticket item. Whenever you make a big purchase, your credit score is affected. Only trade your vehicle when you have significantly improved your credit score.

Know How To Spot Scams

Unfortunately, people with a bad credit score are targeted by many scammers and taken advantage of. The desperation for financial help is often exploited. You’ll find many offers on the internet that promise to help you out in one way or another. But the reality is they are scams and would get you into trouble. Avoid them as much as possible.


You can buy a car with bad credit, but it’s best to improve your credit before applying for a loan. The above 11 tips will help you improve it and ensure it doesn’t get any worse.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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