Causes of No Credit or Bad Credit Auto Financing

Causes of bad credit or no credit situation while availing auto finance

A positive, error-free and a “good” credit rating can make a large difference when it comes to availing “Auto finance” facilities. It is generally observed that a majority of people remain blissfully unaware what their credit report says, or what their credit ratings are, before they go in for an auto finance. The problems become prominent when they apply for an auto loan, and realize that certain errors resulting into “poor credit” ratings could easily have been avoided, if they had “known” about it earlier on. The following details some of the causes, which can result into a “bad” credit situation.

 

Inquiries

Inquiries are made when companies look at your credit report just before issuing you auto financing facilities. This can be from a credit card company or a mortgage company. Certain auto finance companies don't go in for inquiries regarding your credit status - but it’s rare. It takes around 30 to 60 days for your credit to show up on your report. Auto financing companies are skeptical of individuals who have applied for a lot of credit in recent times. They don't get to know for sure whether you were “accepted” or not. For example, if you’ve applied for five credit cards all at once, and got all of them, these new credit cards don’t show up on your credit report, since it takes time for your past financial history to be included in your credit rating. You would be incurring larger overheads for these liabilities, and the auto finance company doesn’t get to know about it in time. So rather than taking a risk of issuing an car loans credit to a customer, the auto financing company can simply deny you the loan on basis of “excessive inquires”, even when you might have not availed the credit cards in the first place, or decided not to go ahead with the idea later on.

Solution: Inquiries last for 6 to 12 months after you’ve applied for credit, and do not have a permanent effect on your credit ratings. Inquiries are not negative marks or scores, but more of an indication for the creditors to protect themselves from frauds and defaults.

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Late payments

Late or delayed payments are the most common causes that lead to a bad credit rating. Late payment “flags” are exactly what they describe – they convey the credit agencies that you were not paying your bills on time, or have “defaulted” at times. What ever the exact cause, they seriously affect your credit ratings and “tell” the credit agency that you're a “high” risk customer. Your credit score moves down due to late payments, and prevent you from availing much required no credit car loan or credit for your future home and car loans. The late payments are classified as 30 days late, 60 days late, 90 days late, and 120 days late. The more “later” you are, the more it “harms” your credit ratings. Late payments can stay on your credit report for as long as seven years from your last reported date.

Solution: Redeem your bills on time, and be sure to check out for “due dates” well in advance. If your credit rating indicates late payments, and you wish to get it removed for good, you could engage with a credit repair service or agency. These services cater to severely affected bad credit or bad credit car financing cases and resolve the negative points within 3 to 18 months, depending upon your rating status.