You need to know what your credit scores are before you even set foot on a car lot. If you do not, you are setting yourself up for embarrassing rejection. The best way to get your credit score is to go online and find the website where you can get all three of your credit scores for free. Laws exist that guarantee you free credit checks from all three lenders once a year. You will be looking for scores from the three credit reporting agencies: Experian, Equifax, and Transunion.
Your Credit Scores
Credit scores were created as a standard to set standards by which to grant loans. Many lenders, not just auto lenders, use the scores to assess the probability of repayment by individuals. A lot of variables are used. Among those variables are your promptness on credit card payments, satisfactory retirement of past loans, any collections activity taken against you by other creditors, and a number of other measurements. All these variables calculated together give you a score.
Credit Score Ranges
When lenders pull your scores, these are the rating they use.
— 720 and above is Prime Credit
— 680 to 719 is Good Credit
— 640 to 679 is Marginal Credit
— 600 to 639 is Sub-Prime Credit
— 580 to 599 is Poor Credit
— 525 to 579 is Bad Credit
— 480 to 524 is Very Bad Credit
What The Scores Can Mean
Should your scores land below Marginal Credit, it is not the end of your financial life. In these recessionary times, many in the finance industry have faced the fact that there are a lot of folks who cannot boast a Good Credit to Prime Credit rating. Therefore a lot of companies have altered their requirements to lend money to people even if they have Poor Credit, for whatever reason. A rule to remember is that the lower your scores are the higher your interest rates will be.
Credit Scores and Auto Loans
Auto loans are not as tough to qualify for as are mortgage loans. The sum of money is small in comparison. If you meet the minimum, usually around 640, though this varies from lender to lender, you should not have much of a problem landing a car loan. If you find you have a score in the area of 480 to 524 (Very Bad Credit), the best way to boost your chances of getting an auto loan is to come up with a substantial down payment. This gives lenders confidence that you have invested enough that you will not walk away from your debt obligation.
Do Not Give Up and Shop Around
To get you in the driver seat should not be that difficult no matter how poor your score. Now that you know the fundamentals of car loans, you are off to a good start. What is really the optimal situation is to have your financing lined up before you even step onto a car lot. Start your search for car loans online. The Web will give you an opportunity to see what is out there and what is required. There are lots of lenders willing to make auto loans for people with less than stellar credit. Rates and terms will vary widely, so shopping around will help save you a lot of money. You should be driving in no time.