Are There Auto Loans for Bad Credit?

There are three numbers that greatly determine your ability to obtain a loan – your three-digit credit score.

Lenders use credit scores as a method of quantifying and evaluating an individual’s creditworthiness. By accessing your past financial history, your credit score predicts your likelihood to repay debt in the future.

A good credit score offers loans with better rates and access to additional funds. While a poor credit score will make it more difficult to get a loan.

What Does a Credit Score Measure?

Your credit scores consider data in five areas to determine creditworthiness including payment history, the current level of debt, types of credit used, length of credit history, and new credit accounts.

  • Your payment history – Paying your bills on time helps you avoid late fees, interest charges, and bill collection. But it also is a large factor in your credit score.

    Creditors, vendors, and service providers report your monthly payments to the major consumer credit bureaus — Equifax, Experian, and TransUnion. Those reports include whether you have made your payments on time. If you have trouble making payments your credit reports could be affected for a long time.


  • Current unpaid debt – Your credit score accounts for the amount of debt you currently have outstanding. This will measure your account balances as a percentage of your credit limits. A good indicator would be if you are using less than 30 percent of your credit limit.


  • Number and types of accounts – Scores are also determined by a mix of installation and revolving accounts. Installation accounts set payments over a specific time. They would include car, home, and student loans. Revolving accounts vary monthly in payments and don’t have a set end date. Revolving accounts would include your credit cards and other accounts that have fluctuating monthly payments.


  • Credit age – This is looking at the length you have had access to credit. This will look at the age of your oldest accounts up to recently opened accounts. The longer you have had an account open the better.


  • Access to credit – Creditors want to know that you are able to properly handle the accounts you have access to for money. They are looking for you to have access to credit cards and other funds that you aren’t fully utilizing.

    Paying off a credit card will help lower your credit utilization. If you close the account you just paid off, you lose that account’s credit limit. Now your other balances represent a greater percentage of your limit. It is ideal to keep an account open, even if it is paid off. Use this card to fill up your gas tank once a month.


  • New credit applications – When you apply for credit the lender will run a credit check. Credit checks are considered a hard inquiry into your history. A hard inquiry on your credit report may result in a temporary dip in your score.

What Are the Different Credit Score Ranges?

Credit scores range from 300 to 850. Creditors will set their own standards, but typically consider the following category ranges:

Very Poor: 300-579

Fair: 580-669

Good: 670-739

Very Good: 740-799

Exceptional: 800-850


A black woman and black man look in car window with happy expressions on their faces

What is a Bad Credit Score Range?

A very poor credit score would be anything under 579. A score in this range indicates a person has a poor credit history, which could be a result of bankruptcy or other major credit problem. A score this low could also indicate that a person doesn’t have a long credit history or enough to effectively measure their financial stability.

Most lenders would decline credit applications from people with a score within the very poor range. If a lender is willing to work with a person with a very poor credit score they will likely only qualify the person for a secured credit card or other stipulations. People are often faced with bad credit auto loans.

Do you have a perfect credit score?

Types of Predatory Bad Credit Auto Loans

Unfortunately, people with poor credit scores often are taken advantage of by lenders because they have limited lending options. Bad credit auto loans are common from lenders who try to take advantage of people who don’t have other options.

Predatory lending is when lenders lure borrowers into loans that aren’t what they expect. For example, a lender would attract people into less than ideal financial situations and target them for this unethical practice. Borrowers are then faced with high-interest rates, large fees, and unfavorable loan terms.

Some types of predictor lending are:

Bait & Switch

Bait and switch is when a lender promises one thing in the loan but sells the borrower something different. Examples would be enticing a borrower with one interest rate and then changing it and charging a higher interest rate.

Another bait and switch would be when a lender completely changes the loan to the borrower after they sell them on a more favorable loan. Bait and switch are typically made at the last second and, sometimes, the borrower is not made aware of the change.

Asset Based Lending and Equity Stripping

Asset-based lending, or equity stripping, is when the loan structure is based on the equity the borrower has built up, rather than the borrower’s ability to pay back the loan. The borrower is at risk of not making payments and then having their home foreclosed.

Loan Packing

Loan packing is when the lender charges the borrower for unneeded extras. The lender makes more money on the transaction and the borrower is faced with unneeded additional items and fees.

Balloon Payments

Balloon payments occur when the loan begins with low-interest rates and payments. At some point, the interest rate “balloons” and the interest rate is adjusted to a higher rate. When the rates adjust the payments are excessive. The borrower needs to refinance because they are unable to make payments at the new rate.

Negative Amortization

Negative amortization is when you take out a loan and the payments are amortized over a certain period. With negative amortization, even when you make a payment the amount you owe goes up because your payment is not enough to cover the interest.

Focus Federal Offers a Fresh Start Auto Loan 

At Focus Federal our Fresh Start car loan program can get you back in the driver’s seat with a personalized loan to meet your needs. We help you finance a car at a price that is close to low book value. 

Qualification Requirements for the Fresh Start Auto Loan includes: 

  • You have a job
  •  Your job will most likely continue
  •  You like your job and your job likes you
  •  You will give us direct deposit of your paycheck-if applicable
  •  We will finance your car and help you buy one at a price that is close to low book value

A loan through Focus Federal will help you avoid payday lenders, avoid high-rate loans, help raise your credit score, and increase your ability to borrow at lower interest rates in the future.

Rebuild Your Credit at Focus Federal

Focus Federal is here to help you understand and obtain a loan that best suits your current financial situation and avoid bad credit auto loans. We know that sometimes life happens, and people need help getting their financial life back on track. We offer several loan programs, checking and savings options, and personalized help to meet your needs.

Visit us today to see how we can help you get a fresh start.