Borrowers with bad credit score sometimes assume that having a cosigner for their auto loan automatically qualifies them for an account. However, even if your cosigner has great credit, the lender may not approve your loan application if your credit rating is too low. Thus, it is better in general for you to repair your credit history before looking for any type of credit.
Identification
Your score does matter, even when someone cosigns on a car loan with you. Creditors often give the most weight to the worst credit rating, especially if the person with bad credit is the primary applicant, because the lender usually must collect from the primary borrower first. Also, hunting down a cosigner and forcing him to pay the bill costs the company time and money if you default on payments.
Other Requirements
If you have the ability to pay the loan and the cosigner has an excellent rating and a low monthly debt-to-income ratio -- usually less than 36 percent with the potential monthly loan payments factored in -- you have a much better chance of obtaining the auto loan than applying as an individual. The lender also looks at you and your cosigner's employment history for the past year. In general, you both should have lived at your respective residences for the past six months and had the same job for the past year, according to CarsDirect.
Considerations
Review your financial situation and determine if you can afford an auto loan. If a lender requires a cosigner, this means you are a risk the dealer is not willing to accept. Talk to the cosigner about his responsibilities. He could damage his credit rating if you miss payments on the account, even if it is an accident, such as the bill going to a wrong address.
Auto Loan Without a Cosigner
You probably can overcome bad credit and obtain an auto loan without a cosigner. For instance, you can offer more than the standard 20 percent down payment to hedge against the loan exceeding the value of the car. You should also look for ways to increase your pay, such as by taking a part-time job. In the months leading up to your auto loan application, make paying all of your bills on time a priority and pay off as much of your credit card bill as possible.
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