Credit Basics for Car Loans
Understand the basics of your credit, ways to improve your credit score, basic requirements for qualification and more.
- 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 of the best ways to improve your credit score is to finance an automobile and make the payments on time. Automobile loans are considered “installment loans.” Installment loans have a fixed monthly payment. Credit cards are unsecured “revolving” debt and while they should also be paid on time, they do not generally have the same impact on your credit score as installment loans.
- 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 totally secure web site and we comply with or surpass all applicable privacy protection laws. 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.
Applying is easy! We can have an answer to you in about 30 seconds and you can be shopping for a car today!