How to Refinance My Car With Bad Credit

Written by barb nefer
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How to Refinance My Car With Bad Credit
You may be able to get better car loan terms. (truck image by berean from

Sometimes you are forced to accept an extremely high-interest loan when you are in desperate need of a certain item. A car is required if you work far from home or must transport other family members to various destinations. You may have been forced to accept a bad vehicle financing deal that is eating up a big chunk of every monthly payment with interest charges. You may be able to undo the damage by refinancing your car loan for a more desirable deal with a new lender.

Skill level:
Moderately Challenging

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  1. 1

    Make every car payment on time for your original loan. Your credit score is positively influenced by this, credit score provider FICO advises, so prompt payments will slowly but surely rebuild your credit. This will open new options with borrowers offering better refinancing terms. Set up an electronic payment if you have trouble remembering to mail out a check on the proper date.

  2. 2

    Make payments on time for the rest of your bills. Your credit report shows a history for all of your accounts, including your mortgage, credit cards, store accounts and other loans. You won't be able to refinance your car loan if you pay it promptly but neglect your other bills.

  3. 3

    Dispute mistakes on your credit reports that are making your credit look worse than it really is. In a U.S. Public Interest Research Groups survey, one quarter of credit reports contained harmful but inaccurate information. You can pinpoint these problems by ordering free reports from, which is mandated by the Fair Credit Reporting Act to give them to you each year upon request. Challenge every negative error you can find through the electronic forms on each credit bureau website. They have to erase errors that cannot be validated by the creditor within 30 days.

  4. 4

    Apply for refinancing for your vehicle with your current bank or credit union. They may be more lenient with you if you are a long-time customer, especially if your credit report reflects a sincere effort to improve your finances since you took out the original loan.

  5. 5

    Apply for refinancing with a company that specialises in that market if your bank or credit union says "no." The Edmunds automotive website cites Capital One and Up2Drive as two companies willing to work with bad credit consumers who are cleaning up their finances and who need a better car loan.

Tips and warnings

  • Wait at least 30 days to submit an application to another lender if you are turned down for refinancing by your bank or credit union application. Too many applications and lender inquiries within a short time period hurt your credit score and can keep you from getting refinanced.

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