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.