Can I Buy a Car If I Have Bad Credit?

Auto Loan Approvals Increased to Those with Lower Scores

Experian, one of the three credit reporting agencies, conducts an automotive credit analysis on a quarterly basis. The latest analysis was for third quarter 2011. Lenders are loosening their credit criteria and are lending to those with lower credit scores in the sub-prime and deep sub-prime categories.  Experian’s analysis is based upon their Plus Score, which score ranges from 330 to 830.  This score is developed by Experian and is not the FICO score.

Sub-prime scores range from 550 to 610 and deep sub-prime includes scores below 550. These two score categories are considered higher risk and consumers with these scores are charged much higher interest rates. Typically consumers in these categories have difficulty qualifying for loans. The next higher score category is non-prime with scores that range from 620 to 679 and prime is 680 and above.

More loans approved at lower scores

A higher proportion of higher risk consumers were approved for car loans – 21.87 percent of new vehicle loans went to customers in the nonprime, subprime and deep subprime categories.  Deep subprime loans increased by 17.3 percent, subprime by 17.8 percent and nonprime by 12.5 percent.

The average Experian credit score for new vehicle loans dropped from 769 in third quarter 2010 to 763 in third quarter 2011. For used vehicle loans, the average Experian credit score dropped from 683 in third quarter 2010 to 676 in third quarter 2011.

Highlights

30-day delinquencies were 2.78 percent in third quarter 2011, compared to 2.99 percent in second quarter 2010, which is a 7.05 percent decrease.

60-day delinquencies were .71 percent in third quarter 2011, compared to .77 percent in second quarter 2010, which was a 7.4 percent decrease.

Total volume of dollars at risk also fell by $2.99 billion from third quarter 2010 to third quarter 2011.

Repossession rates were .62 percent in third quarter 2011, compared to .67 percent in third quarter 2010 or a decrease of 6.4 percent.

New vehicle average loan amount was $25,873 in third quarter 2011, compared to $25,273 in third quarter 2010 or a $600 increase.

Used vehicle average loan amount for was $17,359 in third quarter 2011, compared to $16,706 in third quarter 2010 or a $653 increase.

“Overall, our Q3 analysis shows very positive signs for the automotive lending industry,” said Scott Waldron, president of Experian Automotive. “With more loans being booked outside of prime, lenders are showing they are willing to be more flexible in their lending strategies. However, consumers may still have the impression that lending is extremely tight, so it is important for lenders and retailers to educate car shoppers that there are financing options available to a wider group of consumers.”

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Auto Loans, Credit Report, Credit Score, Debt, Getting Credit, Money & Identity

This post was written by John Ulzheimer