What’s Going On YouTube Family
Welcome to Automotive Life! My name is Lucky, and today we're going to be doing a video on how to get an auto loan when you have bad credit. Currently, this topic is trending on Google and YouTube, and there's a lot of fake credit gurus out here giving people really bad information. So I wanted to give you a perspective from not only a dealer but also from a banker, and how the credit bureaus look at your credit and some of the things that work and do not work.
.png "Drive Away with Confidence: Tips for Getting an Auto Loan Despite Bad Credit")
Examples of Different Credit Situations
Now, we’re going to give you examples of somebody that has a repo, somebody that has bad credit, and also somebody that has no credit.
Current Economic Climate
First, let’s go ahead and talk about the economy. Obviously, we’re in a recession, so banks tend to lend a little bit less and have higher restrictions. The last two to three years, as you guys can see, pretty much anybody with a pulse and a few dollars can get an actual auto loan. So that's why there’s so many people coming out now saying that they can't get approved for auto loans, can’t get approved for a certain dollar amount, or can’t get the car that they want.
Understanding Credit
Before I jump into the three examples, I want to talk a little bit first about credit. Whether you're trying to buy a car, if you just had a repo, have bad credit, or are a first-time buyer, all these things are going to apply to you.
The first thing is they’re going to ask you for a massive down payment. So if you’re trying to buy a $25,000 car, they’re probably going to force you to put anywhere from $5,000 to $7,000 down, and your interest rates are probably going to be anywhere from 20% to 29%.
Recommendations for Securing a Loan
So the first thing I'd recommend is to take your down payment, whether it’s $5,000 to $7,000 or even if you have less than that, and buy a cheap, affordable car. I don’t care if it’s $2,000 to $3,000—get something that can get you from A to B for the next 90 days. After that, you’re going to take the rest of your money and go to every single small bank and credit union in your town and ask them for a secured credit card.
I like Discover, Capital One, Wells Fargo, Bank of America, Navy Fed, PenFed—there are a bunch of banks that do this. But our whole goal is to start building new trade lines ASAP. This is very important because if we set up all these credit cards within the first 90 days, each one of these things will be reporting. Revolving credit is the fastest to report and the fastest to jump up your score. A lot of people get this misconstrued where they think they should clean their credit and then add on some trade lines. Don’t do that—start today. This is the most important thing.
Building Your Credit
90 days will go extremely fast, but if you do it this way, not only will you have a better score, so you’ll get a better rate, but more than likely you won’t be asked for a massive down payment. On top of that, if you have some money left, these are revolving credit card accounts that are secured accounts. I recommend doing a security-backed CD when it comes to a regular traditional loan.
So if you go to Wells Fargo or Bank of America, you can give them a $5,000 to $10,000 deposit, depending on how crazy you want to get. They give you a CD, which can be used as collateral, and you pay every single month on this loan. So now you have revolving credit and a structured auto loan, which will build up your credit as well. Between both these things, within 90 days, you should see a significant change in your credit.
Cleaning Your Credit
Once you secure all these trade lines, you can go ahead and start cleaning off your credit. Unfortunately, a lot of these fake credit gurus won’t tell you this. I don’t recommend doing these $60-$70 a month services. Try to find somebody who is actually good and delivers. Unfortunately, I have a friend here in Vegas who does it, but he’s way too expensive and completely booked out. So if you do credit repair and you’re actually good and can show me proof, email me in the link below.
Dealing with Authorized Users
What I would recommend doing is paying to get certain trade lines off. Every time they do something, offer a bounty. For example, offer $500 to $1,000 to take off a trade line and do that along the lines of your credit. Get all the inquiries removed. It’s not that hard—there are a lot of people out there that do this.
A lot of people are going to say, “Well, I’m not going to get secured credit cards and basically give them money so I can borrow money back. I’m going to buy trade lines or authorized users.” Don’t waste your time, especially because now that we’re in an economic recession, banks don’t like authorized users. They want to see real trade lines that you’re liable for.
Authorized Users vs. Real Trade Lines
This is the most important thing. Build these trade lines and then clean off your credit. If you want to add a few authorized trade lines—maybe your mom adds you onto a credit card that she’s had for 10 years and you want to get a quick boost in your score—that’s fine. But the way the banks and dealerships look at it now is we literally just mark off authorized users like they don’t matter because we know all the tricks and scams, especially when it comes to credit repair.
Credit Sweeps and Red Flags
There are things called credit sweeps where they basically clear everything off your credit so you can start fresh, but all the credit bureaus know about this. That’s why I tell everybody if you start building accounts before you clean your credit, this will actually stay. If you’re a grown man, and you’re 40 years old, and they start wiping your credit clean without any new trade lines posting, it’s going to send up a bunch of red flags. This is why you see a lot of people in credit gurus’ comment sections who paid them a bunch of money and then 60 to 90 days later all that stuff that was cleared off came back because it didn’t pass through the second follow-through.
Three Examples
So now we’ll get into the three different examples.
Example 1: Repo
Let’s say you don’t want to wait, save money, or build your credit; you just want to buy a car today. I’m going to tell you exactly what you’re going to need to do if you’ve had a repo. If you’ve had a repo, here’s the downfall: you need to humble yourself. This is probably the biggest thing that we see.
I’m going to be using this Mercedes as a demo. Most of the people that come in with repos want a car just as nice or nicer than the car that they just had repoed. You need to bring yourself back down to reality. You need something affordable and cheap, like this beautiful smart car here.
Why Choose Affordable Cars
If you can just suffer between 6 months to 9 months and show somewhat of a payment history that you’re getting back on your feet, that is the most important thing of all. I’d rather have you pay 29% on a $10,000 loan than paying 29% on a $35,000 loan. This is very important. You’ve probably heard the term “you earn your credit”—it’s wrong. You pay for your credit. If you go the Mercedes route, you’re going to pay three to five times more than just getting a cheap economy car to build your track record.
6 months passes very quickly. I see so many people so excited to rush in and do all this crazy stuff. Currently, right now, would I like to be driving a Lambo? Of course, I would. But I’m watching the market, everything is going down. I sold my R8 and am actually driving a smart car every single day. Believe it or not, I’m okay with that because I know deals are coming. I can be patient. I’m paying off some of my credit card debt because I know the deals are coming. You should be patient as well.
Example 2: Bad Credit
If you have bad credit, it’s a little bit more convoluted. I can’t give a one simple answer for everything, but I’ll try to provide a broad answer to help you go in the correct direction.
Dealing with Maxed-Out Credit Cards
If you have your credit cards maxed out and that’s why your score is down, or if you’re late on your credit cards, student loans, or have other issues, here’s what you can do.
The first thing is if you have a lot of debt and are upside down, pay down your credit card literally a week or two before you buy a car. If you go for some of these auto approvals like Capital One, PenFed, or Navy Fed, you can actually get approved with no money down. They’re one of the few banks that still do automatic approvals with zero money down.
Handling Collections
Also, you need to know the date of every single credit card or bill that you have when it posts. The second it posts and you’re good to go, you can run your credit that second. I mark mine in my calendar because I know a lot of people want to see a better score. When you’re sitting at a 620, that’s not the worst score; there are plenty of banks that will approve you.
If you’re sitting at a 580, it’s going to be a little bit more difficult. But if you have some collections, you need to get all the hard inquiries, and make sure that your credit is in check. You’ve got to watch out for these old, outdated credit reports and be careful who you’re dealing with.
Example 3: No Credit
If you’re a first-time buyer, here’s what you need to do. First, get a secured credit card. It’s going to be the fastest way to build credit, just like I said before.
Utilizing Secured Credit Cards
This is going to jumpstart your credit history faster than anything. The second thing is, if you don’t have money, you don’t need to start off with a huge car. Start with something small that’s inexpensive. This is why I recommend going through a traditional loan for something like a $5,000 to $6,000 car to get started.
Conclusion
I hope this video helped you out. If you have any questions or if there’s a certain topic you want to talk about, comment down below. I’m here to help you get back on track. Don't forget to like and subscribe. My name is Lucky from Automotive Life, and I’ll see you in the next video.
.png)
.png)
.jpg)
