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When Purchasing A Car, What’s A Good Credit Score To Have?

A low credit score can make it challenging to get a car loan. Loan applications involve checking the credit reports of a prospective borrower. If the report indicates poor credit due to too many delinquencies, most lenders will deny financing.

Credit scores fall between the range of 300 and 850. The best interest rates are offered to borrowers with a score of 700 or better. Between 580 and 669 is considered a fair score, while a score under 579 is deemed poor.

For the right price, some lenders may still finance your vehicle. Unfortunately, the interest rates will be much higher, as the financer is assuming greater risk. And the application process will likely require the applicant to explain negative items on the credit report.

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What If You Don’t Have A Stellar Credit Score?

A borrower with a poor score may also need a cosigner. A cosigner agrees to be responsible if the borrower fails to repay the loan, reducing the lender’s risk. Asking someone to be a cosigner means they would take on a big responsibility. The lender has the right to go after the deeper pockets of the cosigner if the borrower defaults, so many people will be reluctant to take that role.

Alternatively, there are online lending agencies that specifically work with poor credit applicants. With these types of lenders, interest rates and monthly payments will be much higher. There will most likely be expensive fees during the application process.

If these different types of lenders deny the financing, applicants can request a review. This review will help determine what changes need to be made before attempting to reapply. A viable alternative is to wait and instead try to improve your credit score.

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Simple Ways To Improve Your Credit

To check your credit rating for free, you can use the online tools offered by Credit Karma. These reports will indicate whether the lousy credit rating is factual. Be aware of erroneous record entries and expired items past the limitation dates. Through the Credit Karma website, you can dispute bad listings—to attempt to have them removed—with two of the three major credit bureaus.

There are other advantages to waiting in addition to cleaning up a poor credit rating. Prospective borrowers can spend this time saving additional down payment funds. They can also make sure not to add any additional debt, pay down the current debt, and make certain bills are paid on time. Probably the best way to improve a credit score is to achieve a record of repaying credit on time.

Establishing a higher credit rating can open more financing options. And paying down debt can allow the borrower to put down a larger downpayment, keeping interest rates down and avoiding negative equity where more is owed than the vehicle is worth.