Bad Credit Financing and BAD Credit Financing.

Okay there is financing people with bad credit and then there is financing for people and the financing is bad. (Get it bad credit and bad credit?.....okay I am not really on my game am I?)

Here is my pitch for today. You CAN get financed if your credit is less than perfect. It is worth your while to make a logical determination of what your credit looks like. Here http://www.ftc.gov/bcp/edu/microsites/freereports/index.shtml is the official government link for you to get your free annual credit report. From there you can get the link to see what is in your credit file. There are a lot of other services that say that they are free but you will find out that they are only  "free" IF you sign up for a subsciption to their service!

The other thing you need to know is that your raw credit score is only a part of the equation. Let me explain:

I was taught in college that there are three "C"'s of credit:

  1. CREDIT ................Have you gotten credit before and have you paid on time?
  2. COLLATERAL...... How much are you borrowing against what it's worth?
  3. CHARACTER....... Do you have a history of stable employment and housing?
  4. CAPACITY............Can you afford the monthly payment given your income?

One way or another the bank takes these things into consideration.

In years past I believe they relied almost too much on your raw credit score and did not pay enough attention to capacity. I think that they figured if you had been paying your $800 mortgage payment on time and had a 750 credit score you'd be okay on your next mortgage, no matter what. This did not work out so well when buyers with $800 mortgages were approved for $2,200 mortgages and could not afford them. This being said, knowledge is power and it is good for you to know what is in your credit file.

Financing is not "one size fits all". You may be able to overcome some dings in your credit by putting more money down, getting a less expensive car or getting a co-signer. The co-signer needs to know, however, that they are responsible for the loan if you are in default.

Years ago the banks would accept almost anyone as a co-signer. There were a lot of people getting old Aunt Matilda to co-sign for their loan and good old Aunt Matilda did not understand that when Nephew Charlie never made a payment it affected her credit. More often than not, poor Aunt Matilda only found this out when she went to get a car loan herself and found she could not! With the tightening of the credit markets banks are a tad more skeptical on accepting co-buyers.

Beware of the dealers who advertise that say "we finance everyone".  I knew of a used car dealer who owned a bunch of cheap cars. The cars he had were actually worth in the area of $2,000. He would sell the cars for $5,000 but make you put$2,000 down!  He got his inital cost of the vehicle from you up front, so he had no risk in the deal. His interest rate was over 30% ! Of course he could finance everyone! You paid for the entire cost of the car up front, all you were financing was his $3,0000 profit!

  1. If you did not pay, he came and picked up the car and sold  it again for $5,000, keeping your $2,000!
  2. If you DID pay he made a 150% profit on you upfont ($5,000-$2,000) PLUS whatever you paid in interest!

THATS what I call BAD CREDIT!

Now here is the "sell" for Genesee Valley Chrysler Dodge Jeep and Genesee Valley Ford:

We know that buying your new or used vehicle is a big deal, no matter what the cost of the car. We try to get you the car you want of course but we also take the time to talk to you abut your finance choices and help you decide what is best for you and your family. From us you can get all the information that you need, weight your options, then make a choice.

Isn't that the way it should be?    


2 comments

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Jan 25, 2013 12:03 am
- Delmar

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Mar 2, 2013 6:08 pm
- wnydealer@aol.com