Can I Get An Auto Loan With Bad Credit?

Periodically the Professional Risk Managers’ International Association (PRMIA) conducts a survey of bank risk professionals and lenders on behalf of FICO, the company that invented the credit score.  A recent survey was conducted in June 2012 and received responses from 192 risk managers at banks throughout the U.S.

According to this survey, the responders expected the availability of car loans to consumers with damaged credit to increase and the delinquency rates on most types of consumer loans to remain flat or decline. This shows that they think that consumers are regaining their credit health. The exception was student loan delinquencies, which most respondents expected to increase.


More than 50 percent of respondents expected the auto industry to have the largest increase in lending to consumers with damaged credit in 2012; 38 percent expected the largest increase in credit cards and 12 percent in residential mortgages. Damaged credit is also referred to as subprime borrowers (those with credit scores below 640).

44 percent of respondents said that overall subprime lending in 2012 would remain flat compared to 2011.

Over the next six months, most of the responders expected delinquency rates to remain flat or decrease for most categories:  credit cards (69 percent), car loans (77 percent), mortgages (73 percent) and small business loans (72 percent.

64 percent expected delinquencies on student loans to increase. This is the third quarter in a row the responders thought student loan delinquencies would increase.

82 percent of respondents expected car loan supply to meet or exceed demand; 77 percent expected credit card supply to meet or exceed demand; 55 percent of respondents expected residential mortgage supply to meet demand. 56 percent said there would be an adequate supply for small business loans, and 61 percent felt that student loan supply would satisfy demand.

35 percent of responders said the approval rate for consumer credit applications would increase over the next six months, compared to 19 percent who said it will decline.

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45 percent of responders expected the total amount of consumer credit extended by lenders to increase during the next two quarters, almost three times the percentage of respondents who expected a decrease.

“I see these results as quite positive, save for student lending,” said Jennings. “Last quarter we saw a sharp uptick in sentiment regarding consumer credit, with more respondents expecting things to improve than we had seen at any point in the previous two years. Now lenders are expecting things to at least stay the same, and quite possibly improve further. These results indicate that bankers believe consumer health has turned a corner.”

“We are clearly seeing a loosening of credit in the auto finance market, with lenders responding to increased consumer demand,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “This is good news for car dealers and it should help the auto sector continue its recovery. However, underwriting for other types of consumer lending, particularly mortgages, is still tight. Lenders aren’t yet ready to increase their exposure for the sake of growing their mortgage portfolios.”

Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at, the credit blogger for, 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, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.