Requirements, Tips & More
Credit Score Requirements to Qualify for Auto Loan
Credit score is an important factor when applying for an auto loan. It's not the only factor lenders use to decide whether or not they will finance a customer, but it is a factor that can make or break their decision. However, the final decision of a lender is dependent upon more factors than the credit score. For instance, a customer with a higher income can possibly get away with a lower credit score in some instances since they will have a higher likelihood of repaying the loan.
The truth is that it's entirely possible to get approved for a car loan with almost any credit score-especially if you go to an auto lender that's willing to work with you. What the credit score will affect is the interest rate and borrow amount you may qualify for. So, it's not so much a matter of a high credit score, but more so the terms that will come along with the auto loan. A loan company will always consider your ability (Income/Debts) and your Intent (Past credit payments).
How to Improve Your Credit Score
In the modern-day, there are different types of technology that allow you to improve your credit scores instantly and easily. The most popular of these technologies right now is Experian Boost. It's a free feature offered by Experian, a multinational credit reporting company, that can increase your credit scores immediately. However, this feature is unlikely to work long term or for more serious credit inquiries due to it only reporting positive credit history and users having the option to exclude certain payments and portions of the report.
There are also more established methods of permanently improving your credit score. The most obvious (albeit slower) way to improve your credit score is by making credit card and auto loan payments on time. Any of the free credit-reporting sites should be able to show you your lines of credit, how much you owe currently, and your limit. While it's a good practice to pay all bills on time, starting your journey of responsible paying with the ones that most affect your score will more immediately affect your credit in a positive way.
You'll also want to make frequent payments whenever possible. One way to do this is by making small payments-also known as micropayments-throughout the month, which can help you keep your balances down and it may even lower your interest. Asking for higher credit limits is another way to improve your credit score. Your overall credit utilization percentage will be lowered immediately if your credit limit goes up, but the balance stays the same.
You should keep a close eye on your credit so you can dispute any credit report errors that might appear. There's nothing worse than bearing the financial burden for fraud. While there are numerous ways to raise a credit score, the most important thing to do is be responsible with your financial decisions, and your credit score will steadily rise over time.
How Does Credit Score Affect Car Loan Interest Rate?
Credit score is an important factor to consider when deciding to purchase a car. The health of your credit score will impact which cars you're able to buy. Credit scores are also determining factors in car loan interest rates because a higher credit score indicates a high probability of making payments on time. A good credit score will allow you to qualify for low-interest rate loans and possibly even 0% financing.
Lower credit scores, on the other hand, will be accompanied by higher interest rates and could also affect the amount you have to put down on a vehicle. Lower scores represent a higher risk to many lenders, so they would likely prefer to give you a larger payment for a shorter period of time.
What Should I Consider Before Applying for an Auto Loan?
The first, and probably most important, thing to consider is your budget. It's important to know how much you can spend before beginning your car search. That way, you don't try to get cars that are outside of your budget and can negatively affect your credit.
Another important consideration is to look over your credit report prior to applying for the loan to ensure everything on it is accurate. Also, by looking over your credit report, you may become aware of things you could improve on and be able to get them in order before applying.
Next, you want to start looking at quotes for cars you're interested in buying. No two dealerships will give you the exact same deal, so it's up to you to try to find the best deals for the type of car you want to buy.
The next step is to seek preapproval for your loan. After figuring out a price range for the car you want and possibly even deciding on a lender to work with, it's a good idea to get pre-approved for the amount you want. This will give you a rough estimate of how much and what interest rate you'll get approved for.
When preparing to get a car loan, it's a good idea to examine the interest rates and consider the length of the loan. Compare how much the car is versus how much you will be paying back, and decide whether it's worth the risk of getting the car loan and buying the car.
Can I Still Get an Auto Loan With Bad Credit?
This is a question that many people will ask themselves when they need a car but are in a less-than-ideal financial situation. The good news is there are car loan companies out there that will help those in need of a car loan who don't have good credit-New Roads Auto Loans being one of them!
New Roads Auto Loans understands that life happens-people will sometimes be in situations where their money isn't exactly where they would like it to be but, due to extenuating circumstances, they need to buy a car.
We accept customers who have had a bankruptcy (whether it has been discharged or not-though some restrictions may apply). We also accept buyers with a previous repossession, charge-offs, collections accounts, first-time buyers, buyers with no credit, and buyers with low credit-even lower than 525! And if you can't afford a down payment, no problem-we offer zero down payment auto loans as well.
Give us a call today to see if we're right for you! Our application process is quick and you can get approved in as little as 30 seconds. We want to help you get on the road again affordably with no hassle.
- What is a credit score?
- A credit score is a number valuation from 300 to 850 that ranks the relative risk of lending money to consumers. Each of the three credit bureau providers (Experian, Equifax and TransUnion) use a mathematical formula that considers numerous factors in each consumer's credit file. They look at depth of credit, amount of credit, amount of opened credit, credit utilization rates, payment history, and type of credit to arrive at a credit score.
- Credit scores above 700 are generally considered "prime" credit
- Scores between 620 and 700 are considered "non-prime" credit
- Scores between 535 and 619 are generally considered "sub-prime" credit
- New Roads Auto Loans generally provides financing to consumers with credit scores between 525 and 660 (New Roads also finances many consumers with credit scores below 525)
- How do I improve my credit score?
- One way to improve your credit score is to make payments on your loans, such as an auto loan, on time.
- How do I get my credit score?
- Each of the credit bureau providers is required by law to provide consumers a free copy of their credit reports annually. You can contact the credit bureau providers at:
- Equifax 1 (800) 685-1111
- Experian 1 (888) 397-3742
- TransUnion 1 (800) 888-4213
- What do lenders look at before granting credit?
- The basic loan decision boils down to "ability," "stability," and "willingness."
- Ability refers to the income level and employment history of the loan applicant. If the applicant has either low income or has too many debts in relation to their income, then they have a diminished ability to pay back loaned money.
- A weak employment history (poor stability) also represents higher risk for the lender. Consumers that cannot hold a job are more likely to have difficulty repaying their obligations.
- Willingness refers to the overall credit profile of the buyer. While many consumers encounter credit problems such as bankruptcy and repossession, they also display some positively paid accounts either before or after their credit problems. That profile is typically acceptable to most sub-prime lenders including CPS. There are very few companies that will extend credit to buyers that have never paid anyone and have gone to charge-off or collection status on numerous accounts shortly after the accounts were opened.
- Is my privacy protected?
- Yes. New Roads Auto Loans is a secure web site and we have measures in place to protect your information. Your information is secure with New Roads Auto Loans.
- Does this service cost anything?
- No, the application is totally free. And, we'll also help you find the right car or truck at one of our participating dealerships.
- What happens if I have credit problems and shop for a car before my financing is in place?
- Most auto dealers are not equipped to handle customers with credit problems. That means you could be turned away, asked to add a co-signer, steered to a lesser car, or asked to come up with a very large down payment. It's best to get your financing in place before you shop, it helps put you more in control of the vehicle purchase process.
- What kind of credit problems will New Roads accept?
- Buyers with a bankruptcy discharged or not (some restrictions apply-contact customer service for details)
- Buyers with previous vehicle repossession
- Buyers with charge-offs, slow pays and collection accounts
- First-time buyers and buyers with light credit
- Buyers with low credit scores-even 525 or less
- What are the basic requirements to get qualified?
- You must be currently employed
- You need to make at least $1,800 per month
- You must be at least 18 years old and a resident of the U.S.
- Your total household obligations (including your new car payment) cannot exceed 50% of your income
- How does auto financing work?
- There are really two main kinds of auto financing programs used today-installment loans and lease products. The most common form of finance by far (about 75% of the market) is installment finance. This is a purchase arrangement where the consumer has a fixed monthly payment and owns the car when all the payments have been made. When the vehicle is paid off, the buyer gets the clear title from the lien holder. A lease is the right to use a vehicle for a specified amount of months and the car is returned to the lessor at the end of the lease period. New Roads does not currently offer lease products.