Dear Driving for Dollars,
Two weeks ago, I went to my bank to get a car loan and was denied. The bank said that I have a car repossession from 2008 that’s hurting my credit and that I have a student loan, which is in good standing.
My credit score is 601, and it’s gotten better because of my paying off some debt, but I don’t have any money for a down payment. What can I do to get a new car?
Sorry to hear about your car loan woes, but I know you are on the road to bringing them to an end.
It’s likely the reason you were denied a loan was because your car repossession is still on your credit report. These stay on your credit report for 7 years, so you are very near the 7-year mark and likely need to wait only a few more months before it is removed from your credit report.
You can pull your credit report for free at myBankrate.
Your 601 credit score is not terrific, but it’s not terrible either. It falls at the very low end of Experian Automotive’s “nonprime” category, which represents about 18% of all current auto loans, so you probably didn’t get denied as a result of this score alone.
Take these next few months until the repossession falls off your credit report to get your credit score as high as possible by following the tips in the story Fix your credit before seeking a car loan.
Once the repossession is removed from your credit report, go back to your bank and try to get preapproved for a car loan. You also might apply to your local credit union. Often, the loan interest rates are better than they are at traditional banks, and Experian Automotive’s data show that credit unions currently look upon those with a credit score in the nonprime range more favorably than traditional banks do. Those in this credit category represent about 23.5% of their overall car loan business, compared with 21.1% at a traditional bank.
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