550 Credit Score Car Loans
A credit score of 550 is typically the universal cut-off point for car loans to be denied by lenders. A borrower applying for car loans with credit scores this low will typically not get approved as this indicates some severe problems in dealing with the responsibilities of credit. Simply put, you're in a world of hurt. Within the FICO credit scoring range, which goes from 850 (the best) to 300 (the worst), a score of 550 is the top tier of having no credit – what lenders refer to as deep subprime credit.
Lending options are very limited at this level as credit scores of 550, or lower, tend to be the result of your debts going into collections. Lenders do not want to see this in a borrower's credit history as it points to a pattern of behavior – one that indicates a great deal of risk that the lender will have to assume. Not all people living with no credit are deadbeats, however, as there is a population of consumers that never use credit. Without a record of credit card usage, mortgages, or car loans, these consumers will qualify as having no credit simply as the result having no history to put a score to.
If you have no history of credit usage, you need to start somewhere. Many students go through this problem with their first car loans and there are many lenders who have loan programs tailored to them. First time car loans take into account the fact that a credit score of 550 is related to inexperience, and not irresponsibility. While interest rates are high with these loans, approval for first time borrowers is more likely to happen since there are no instances of deadbeat behavior. Newness to credit is seldom punished by lenders. In fact, most lenders would like to turn first time borrowers into repeat customers.
If you have credit scores that hang around 550, for whatever reason, car loans are not going to be a cakewalk. With credit scores this low, it would be in your best interest to fix the problems with your credit if they are the result of poor behavior. Pay down existing balances and repay any delinquent debts that haven't been, otherwise, settled. If you're having trouble making ends meet while trying to pay delinquent bills, seek out credit counseling, advice on debt settlement, or consolidation.
If you lack a history of credit usage, get a secured credit card. These cards come with high annual percentage rates, but debt is manageable with these cards if you use them sparingly and pay your monthly balances on time. Secured credit cards come with a spending limit, usually, set by how much money you contribute to the originating account. Some cards have annual membership fees, and others have monthly fees. Though these may seem like a bad deal on the surface, secured credit cards are a good way to get your foot into the credit door. Car loans aren't too far off if you manage these smaller debts well.
The deep subprime hole is not impossible to climb out of if you make a few simple financial changes in your lifestyle. Living within your means is the overall goal to staying on track with your money. Overreaching to grab a few luxuries you can't afford is a quick path to disaster, and it doesn't take many big ticket items to do this. Having credit scores in the 550 range, or below, impact every financial transaction that doesn't involve cash – even the ability to get a job. Set a budget, and stick with it. Pay all of your bills on time, and don't throw everything on plastic, especially if you have cash in pocket. Applying for car loans should only come after you've settled all your old debts and, even then, it should be done with your budget in mind.
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