Most of us have hit a “bumpy patch” when it comes to our credit scores. Even a single late payment can throw things out of whack for months until you prove you’re back on track. The worst-case scenario would be to have a bad credit score based on a problem you know is resolved. That’s why it is essential to get a copy of your credit report before applying for a car loan.

Federal law guarantees that everyone gets a free copy of their credit report at least once a year, so take advantage of that.

Bankruptcy

If you are in a bankruptcy situation, then you won’t automatically be disqualified from getting a car loan. It just might mean a higher interest rate or finding a lender who is willing to take on a potential “risk.”

As you might already know, filing for bankruptcy means you’ll have that reporting on your credit history for at least seven years. There is nothing you can do about that. However, consider that a bankruptcy filing in your favor means you have been discharged from your creditors. In a roundabout way that actually improves your credit score because your debt-to-income ratio will have gone up.

A good credit score is what anyone applying for a car loan wants to have on their side.

Another possible benefit of applying for a car loan with a bankruptcy filing is that your new lender knows you don’t have any creditors coming after you for those amounts. You pretty much have disposable income now that can go towards the purchase of a car. Don’t run from your bankruptcy, embrace it as a way of rebuilding.

Check Your Credit History

You might also want to check your credit history before applying. If you can remove some bad “marks” that can raise your score, then it will be worth taking the time and effort to make that happen. Getting pre-approved by a lending company can also help. That way you won’t have to haggle with a dealer who might push you into a higher interest rate bracket. You might find that your bank is willing to offer a line of credit based on your history with them. Bottom line: Do your homework before you show up at the dealer, and you’ll be ahead of the game.