You say your low credit score is due to hospital bills that went into collection. As a former lender (18 years as a consumer and commercial lender) I would call those extenuating circumstances. I know that with a medical emergency you can run up a large bill in a short period of time; and I also know that hospitals tend to refer unpaid bills to collection without really working them. I’ve seen outstanding hospital bills turn to collection accounts in barely over 30 days with no one ever calling the borrower to let them know that was going to happen. So, as a lender I would often overlook a collection account that originated as a hospital bill.
If you can convince your credit union lender of these extenuating circumstances, and that you deserve a second chance, then these other credit considerations could swing things in your favor:
1) Security position: you say you’re putting down $3,000 on an $8,000 purchase. That’s a down payment of 37.5%. I would say that is a sizeable down payment. If the car value is truly $8,000 the lender will be in good shape as far as its security position in the collateral (they will take the car as collateral on the loan). So, that’s a positive.
2) Ability to pay: The lender will look at your employment and income. Have you been employed with your current employer for over two years (or in a “continuous like employment”)? And is your income sufficient to cover the monthly car payment along with your monthly rent or mortgage payment, and any other credit payments you may have, with money left over (called discretionary income)? Ask your credit union what kind of a “debt to income ratio” they like to see. If you can answer the above questions in the affirmative, and your debt to income ratio fits your credit union’s requirements, you should be OK with this credit consideration.
3) Finally, past credit experience with similar lenders: have you had previous loans with the credit union? If yes, and those have been handled well, that would be very much in your favor. Have you been a member of the credit union for a long while? That would help a lot. Have you had previous loans with any other bank, credit union or finance company? If so, and they have been handled well, use them as a direct credit reference. You can even use your rental or mortgage payment history as a credit reference. If payments on those have been made “as agreed”, there is another credit consideration in your favor.
The point is, I would say it is not impossible to get a loan from your credit union if your low credit score is due solely to a temporary medical condition (and the collection accounts have been taken care of, though they still show on your credit report), and these other credit conditions lean in your favor. The credit score is not the only thing your credit union loan officer will look at.