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The good, the bad and the ugly

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So what's good and what's bad? Generally speaking, scores above 700 are excellent, scores in the 600 to 700 range are okay and scores between 500 and 600 are bad news.

Good Car, Bad Credit • Intro • Know your Credit Score • How Bad is Bad? • Bank vs. Dealer Financing • Look Forward to Refinancing • What NOT to Do --- • FICO At A Glance

If your score is at the bottom of this range, don't despair. Given the big growth in "subprime" (bad credit) lending, there's a finance company willing to issue your auto loan in each of those credit categories. In fact, according to consulting firm J.D. Power and Associates, dealers expect to sell to more subprime borrowers than ever next year.

On the other hand, it's best not to kid yourself about rates. Though rates vary somewhat depending on what part of the country you live in, you should expect to pay roughly 15 percent to 17 percent interest rates if your FICO score falls between 500 and 600.

While you may not have time to wait until you've dealt with your current credit issues, interest rates drop, of course, as you climb up the FICO rating scale.

If you do have a bit of time, you may want to check your report for some of the "dealkiller" entries which have the worst effect on your FICO score. For example, you may want to be sure that any closed accounts show as closed rather than delinquent. (You probably won't be surprised to hear that banks don't like to lend to people who are currently behind on their payments to other lenders.)

While the wrangling sometimes takes longer, under the Fair Credit Reporting Act the credit bureaus are supposed to verify any negative information within 30 days and send the updated information to other bureaus as well. The Federal Consumer Information Center offers a sample dispute letter which you can use to initiate the process.

Next: Bank vs. Dealer Financing

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