Don't fear buying a vehicle due to your credit score

Dealerships have relationships with banks, financial institutions that can help you.

By Bob Redinger Wheels.ca

Sep 13, 2016 3 min. read

Article was updated 7 years ago

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Ralph spent a month researching the car of his dreams. He finally decided on the make and model that fit his style and budget, and he chose a dealership where he wanted to purchase it.

After agreeing on the price, Ralph informed the business manager that he would like to finance the vehicle through the manufacturer’s finance arm. The manufacturer was offering a low interest rate on the model that Ralph wanted, so he chose to go that route instead of dealing directly with his own bank.

The business manager ran a standard credit report on Ralph, but the results were disappointing. Due to a few late payments, Ralph had a credit rating that made him ineligible for the manufacturer’s discounted finance interest rate.

Although Ralph was surprised and embarrassed, the business manager quickly reassured him that his credit rating didn’t mean that financing couldn’t be arranged.
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New car dealerships have relationships with many banks and financial lending institutions. If one of these declines a loan application based on someone’s credit history, another might approve it. They all compete with each other for the business.

A credit score is an essential part of the loan application process, but it doesn’t tell the whole story. Banks and lending institutions review more than just the credit scores when considering loan applications. They look at employment status, loan repayment history, income level, debt service ratio, home ownership status, and recent changes in your personal and/or employment situation.

If you have been avoiding buying a car or truck due to a blemish on your credit history, your fears and anxieties may be misplaced. Financial companies are willing to forgive some past financial issues.

In my experience in the retail auto industry, approval rates for auto loans and leases at dealerships are well above 90 per cent, and most people honour their financial commitments.

What if your financial situation is more serious than a few missed credit card payments? What if you recently declared bankruptcy?

Yes, bankruptcy does pose a challenge for applicants and lenders, but other financial options are available.
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A poor credit history might result in an applicant’s car loan being accepted, but at a higher interest rate, or for a less expensive vehicle. Creative financing arrangements are available that cater to applicants with diverse credit histories, such a financially strong co-signer and/or a large security deposit. A general rule of thumb is that higher risk often means higher borrowing costs, and thus, payments.

Under the Consumer Reporting Act, you are entitled to obtain a copy of all the information that a credit agency has on file about you. You can find out what credit bureaus are telling people about you and who has been inquiring.

If you disagree with some of the information contained in your credit report, it’s up to you to find out what is there and to have it changed. Contact the Credit Bureau immediately

If you find evidence of a possible fraud, you might be a victim of identity theft. The fraudulent activity of a stranger could impact your credit history. In this case, after contacting the Credit Bureau, you may need to contact the police.

Credit reports are standard procedure when applying for any type of financing. Don’t let a blemish on your credit report prevent you from buying a new or pre-owned vehicle.

If you have questions about credit reports, contact the business manager at your local new car dealership. They would be happy to discuss the matter in strict confidence.

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