Credit Score and Car Loans
Nothing is more important than your credit score in obtaining a car loan. It is the single most determining factor in the lender’s decision on whether or not to extend you credit. Credit scores tend to break down as follows:
720- 850: The most credit worthy individuals have credit scores in this range.
640-719: If you are in this bracket, you are considers a good credit risk. You should not have any trouble obtaining an auto loan with a decent interest rate.
550-639: If you are in this range, you are considered a below average credit risk and a sub-prime borrower. Interest rates for these loans will be substantial.
300- 549: You will have a hard time getting an auto loan unless you can find a cosigner with very good credit.
So, as you can see, the impact a credit score can have on your ability to obtain automobile financing is substantial. Before you go shopping for a loan, you may want to get a copy of your credit report to make sure it is accurate.
Credit Report
Your credit report is the product created from a gathering of all the facts about your financial life. It contains information about you in the following areas:
- Personal- This will be your name, addresses, SSN, places of employment, and birth date.
- Inquiries- If you apply for credit, the potential creditor will request a copy of your credit report. If you have several inquiries over the period of a year, it can negatively impact your credit score.
- Credit- This is a listing of all of the credit you have obtained. Payment amounts, outstanding balances, final disposition, and payment history are all duly noted.
- Public Record- Any liens, bankruptcies, lawsuits, or judgments against you will be copied from the public record and filed in your credit report.
Read your credit report carefully. If there are problems or inaccuracies on the report, you should spend some time cleaning them up prior to even trying to apply for a car loan.
