The Difference between Poor Credit and Bad Credit
Obtaining a loan is considered a necessary evil by some, but it’s a critical need when planning for your future. From buying a new home to purchasing a new car, reliable credit is an essential component of achieving many common life goals. Data suggests that many Americans find themselves with a poor credit score by age 30. Your financial health and viability are dependent upon responsible spending and building good credit as lenders review your credit score prior to any approval.
So what’s the big deal with credit anyway?
One reason so many people find themselves with bad or poor credit is the general lack of knowledge surrounding how credit works. Your credit score provides an indicator to lenders of how reliable and trustworthy you are as a consumer. In the United States, the Fair Isaac Corporation (FICO) calculates credit scores using several popular indexes. Your credit score is calculated based on several factors, including payment history, total debt, and new credit inquiries.
Missed payments, application for a new credit card, having a high debt to credit available ratio, and closing an account can negatively impact your credit score. These are things you don't often think about until you have an emergency and it’s time to apply for a loan.
Let’s do the numbers...
You hear the terminology all the time: What’s your FICO score? Do you have bad credit? I have a credit score of 800! So what does all this mumbo-jumbo mean? FICO scores range anywhere from 350-850. Here’s what they mean to you:
- Bad Credit: Bad or poor credit scores tend to include any score below 579. According to Experian (one of the indexes used to determine credit scores), borrowers with scores in this range are highly likely to miss payments, pay late, or default altogether. Those with bad credit will have extreme difficulty receiving financing from any lender.
- Fair Credit: Borrowers with scores ranging between 579 and 669 are considered to have “fair” credit. These borrowers offer a little less risk than those with bad credit. However, they may run up against higher interest rates and may or may not have some stumbling blocks when it comes to obtaining a loan.
- Good Credit: Scores higher than 669 denote extremely reliable borrowers. These consumers have proven their ability to pay money back and are considered a low risk by lending institutions. They should have no problem obtaining a loan with a competitive interest rate.
I have bad credit and need a new car. Now what?
Having bad credit can come with a variety of uncomfortable challenges. You may experience issues getting financed for primary goals like buying a home or refinancing a current loan. These challenges can be especially painful when you need to buy things required for day-to-day life.
Think about this scenario: Your car breaks down, and it’s just as expensive to repair it as to buy a new one. However, you’re strapped for cash and need to get a loan to make this purchase. Looking at your credit score, this situation becomes all the more daunting. Luckily, a bad credit car dealership may be able to lend a hand. Also known as a buy here pay here dealership, it can offer in-house loans at special financing rates and terms that may help you while you’re in a pickle.
Use the situation to start working on your credit with bad credit car financing.
While poor credit can seem like an almost impossible hole to escape, there is good news on the horizon! Bad credit car financing is a real thing offered by a buy here pay here dealership. In fact, a bad credit car dealership can actually benefit you as you begin the credit repair process. Here are a few of the many advantages of this type of buy here pay here dealership:
- Flexible Terms: Bad credit car financing terms are pretty flexible, as the dealer is taking ownership of the loan. There may be wiggle room in these terms, so make sure you read the finer details and ask questions before signing. Negotiating the terms of the loan can reduce your payments and help you on your way to repairing damaged credit.
- Extra Incentives: Often, a buy here pay here dealership will extend special incentives to consumers who obtain a loan through the dealer. They work directly with the manufacturer and are charged with getting inventory off the lot. If there is a particular model that’s been sitting for a while or if the newest version will be released soon, they can offer you a discount on these cars. It’s important to ask these questions and lower the loan amount as much as possible. Again, reducing your monthly payment amount increases your chances of success.
- A Chance to Prove Yourself: Using a bad credit car dealership gives you an opportunity you won’t find elsewhere. They’re banking on your future earning potential rather than focusing on past mistakes, which is something you won’t find with a bank or other third-party lender. This alone is reason enough to work with one of these dealerships.
Don’t! If you’re still worried about the loan approval process, give our team at AutoMax a call. We are a bad credit car dealership that’s here to help, offering great loan terms for consumers in a tight situation. With locations in Henderson and Youngsville, NC, we are also conveniently located near the Raleigh-Durham area, as well as other major North Carolina metro areas. It’s time to get on the road in your new dream car. Let AutoMax help!