Buying a car is essential for transportation. Going to work, the grocery store or taking the children back and forth to little league makes having wheels necessary. One of the first things to consider when shopping for that car is your credit score. What are the lenders looking at in a credit score, what credit score is needed to buy a car, and how do you know what kind of interest rate you will get? These questions will all be easily answered by looking at your FICO score. The FICO score it the tool that it used to see what kind of car and how much the lender is willing to lend.
Credit Score for Auto Loan
The FICO scores range from 300-850. They are important in the car buying experience because it decides what lenders say yes when others may say no. If your credit score is below 650, you will have a hard time getting a auto loan. You will have to go to sub-prime lending and use alternative financing methods to get a set of wheels. If you think that your interest rate of 20% for a used car isn’t that bad, you probably could have got the same car for about 5-6% interest with good credit. So what’s a good credit score for auto loans?
The lenders generally write all those flyers and extend prime interest rates to those who have a credit score above 800. If your credit score falls in the 700’s, you can also walk away with a decent loan and have to pay little to no money down. Any credit score under 580 will have to deal with a buy-here-pay-here type system. Don’t go into a lot without knowing your score. It can help you in negotiations. Car lots can haggle on interest rates and total amount of the car, which all ultimately affects the payments. If you need a new car, make sure your credit score is where it needs to be if you want the best interest rates. You may have to clean up your credit a bit to get that prime rate.
Pay your credit cards on time, pay-off smaller credit cards and reduce your credit card usage to around 35% or under. With a little bit of effort, it is easy to boost your credit score, even if it is already good.
Building your credit, definitely takes time and patience. In order to really take out any type of loan, whether it be a car loan, or a home loan, you will need to make sure that your credit is up to par. If you do not have good credit, there are many different tips that you can follow in order to build your credit and be on your way to excellent rates. There will be times when lenders will make loans out to people will bad credit, but you do not want to get stuck with very high interest rates.
Credit Cards and Good Credit Scores
If you have any credit cards, the first thing that you want to do is get those credit cards paid off or paid down as much as you can. Creditors will not loan money if you have maxed out credit cards. They tend to always look at the debt to income ratio. You should try writing down all of your finances to see what you can put aside every month to pay off your credit cards. If you have other type of debt, such as personal loans, etc. you may want to get those paid down as much as you can as well, if you cannot pay those off right away.
If you want to see a quick jump in your credit score, you should try to purchase items on your credit cards, but then pay off the balance in full right away. You should consider paying off your credit cards versus paying only the minimum payment required. You should also avoid spending more than you can pay back. Even if you do not have to use your credit cards, use them because you can increase your credit score rather quickly. Lastly, you want to make sure that you avoid late payments and even missed payments because your credit score will drop drastically.
Perhaps you are just curious about what is a good credit score. Please refer to our other credit score articles for an answer to this question.
If you’re considering the purchase of an existing or new home (even a Manufactured or Modular home) you may have hit the target center if you choose an FHA mortgage loan. Why you may ask? Well, here are some FHA mortgage loan facts for you to ponder. Several years ago the acceptable FHA credit score required hovered around 600 which opened the doors for a possible return to what happened to lenders years back. That said, its pretty much common knowledge that FHA has always been the one financing guarantor (they don’t make loans they just guarantee them) folks could depend on where credit scores were not a factor. Recently, that promise was tossed out the window.
About FHA Mortgage Loans
The FHA requirement started at 500, then moved to 550 and now several FHA approved lenders require 580 scores. However, in April the FHA credit score range was moved from 580 to 620. You are probably asking “so if I want an FHA mortgage what credit score do I need?” In 2015 lenders may balk at any score that is less than 640 but you can still find them at 620 or less if you can produce a valid “mitigating factor” that we’ll get to in a moment.
If you are already an FHA loan recipient and own a home, if you want to refinance using the FHA Streamline Refinance program you’ll be happy to know that you can still do a refinance if you have a 12 month payment history with NO late payments. You can then enjoy no employment nor income verification, no new appraisal and no credit verification of any credit scores.
In the final analysis, if you can’t qualify for a conventional loan, have nothing to write home about credit scores and not many funds for a down payment, you should check the current statistics on an FHA loan. However, be cautious of the loan limit factor which is $271,050 for single family homes or as much as $625,500 in major high-cost cities. So if you can keep your loan ratios under 47 or 48 percent, prove you have 12 months of job tenure and pay utility bills promptly, you’re a possible FHA homeowner.