Q. Is it still possible to be able to buy a car even with bad or ‘inexperienced’ credit?

The simple answer is yes. There are many lenders who specialize in lending to people with poor or bad credit scores. There are even banks that will finance a new or used car for you before an open bankruptcy has been discharged (as crazy as that sounds).

However, all of these lenders will charge you a premium. The fact of the matter is, these lenders know that you have limited choices when you buy a vehicle, and they also know that your previous decision making has not been the wisest. Therefore, these lenders feel pretty confident that you’ll pay them top dollar to get a car loan.

Most of these lenders will charge 21% interest or the highest amount allowed in your state. While this is not a great way to go – 21% interest is outrageous – it may be your only choices if you have to finance a vehicle.

If you find yourself in this boat, consider this alternative:

  1. Get buy with an old car and/or buy an old car for cash
  2. Rebuild your credit by securing a couple of new credit cards and then paying then off every month on time (always pay them off, always on time)
  3. After a few months of using your new credit cards, you can contact your local credit union and see if they will extend you a loan

This process of rebuilding your credit is explained very well on BankruptcyCarLoans.org. Even if you haven’t filed bankruptcy, check out the re-establishment process starting with step one.

Buying a Car with Inexperienced Credit vs. Bad Credit

If you have no credit history (or very little credit history), you have two options:

  1. Secure a co-signer (preferably a parent if you’re under 25, or a spouse if you’re over 25)
  2. Or, investigate first time buyer programs offered by new car dealers

Co-signers are really the best way to go, as they give you the most flexibility. However, if you don’t have a co-signer, you can check out first time buyer programs from Toyota (Scion in particular) and Ford. If you’re a recent college grad, almost all manufacturers offer some sort of first time buyer program as well as some recent college graduate rebate money.

Finally, if you have no co-signer and no interest in buying a new car under a first-time buyer program, then your best hope is to save up a hefty down payment. Plunking down $5000 on a car is a great way to get approved, even if you have no credit history.

Good luck!