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How to Reduce a Subprime Auto Loan Rate

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Houston Auto Approval Center welcomes car buyers in need of subprime auto loans. If you are one, know that you can get a better rate even if you have blemished credit. How can you do this? Read the tips below.

Order your credit score. Your credit score significantly influences the rate you will get. It is therefore crucial that you get your score before you shop around for loans. You can get your FICO score based on your credit report from Equifax or TransUnion from MYFICO.com by paying a fee. You can also obtain your score at the websites of each of the credit bureaus.

Know that your scores from the different credit bureaus can be different. Each credit bureau uses a different scoring model to compute your score. Buy only your credit score and refuse to take services that may be offered with it, such as credit protection and identity theft monitoring.

Get your credit report. Lenders don’t decide on your rate based on your credit score alone. They also consider your credit history, which can be found in detail on your report. Unlike your credit score, your credit report can be had for free from AnnualCreditReport.com. You are entitled to one free copy of your report from each credit bureau every 12 months.

Now you have a credit score and history that will confirm your subprime borrower status. But do you really belong to the subprime category? It isn’t uncommon for credit bureaus to include incorrect information in the reports. Get your report before you apply for an auto loan so you have time to check for errors and dispute them.

How do you dispute discrepancies in your report? Highlight the incorrect details on a copy of your report. In a letter to the credit bureau, explain why these information are incorrect. Send the copy along with the letter via registered mail. The credit bureau has 30 days to respond to your letter.

Improve your credit. Now that you’ve seen what your credit report looks like, it’s time to make changes. Review the correct information in the report that are putting you in the subprime position and make an effort to address them. If small balances reported by collection agencies are those that make you a big credit risk for lenders, pay them off. If you have missed credit card payments, pay them off as well. You improve your chances of getting a better rate if you improve your credit.

Prepare all necessary documentation. Lenders may be more willing to give you a lower rate despite your bad credit if you make loan processing easier for them, and nothing makes loan processing easier than a potential borrower having all the necessary documentation. Lenders usually require a driver’s license, utility bill and pay stubs. Contact your lender to get the complete list of requirements.

Save up for a huge down payment. The amount you put down on a car purchase can trim your interest rate. The bigger the down payment, the better the rate. The recommended amount is 20 percent of the car’s purchase price, but feel free to give more if you can afford it. If you don’t have cash, you can make use of trade-in equity of the same amount.

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