How Does My Credit Score Affect My Car Loan?
Your credit score is more than just a number. If you’re looking to buy a used car, your credit score can play a bit of a role in helping you secure the auto loan you want. Still, how exactly does your credit score affect your car loan?
Check out this guide from the team at Val-U-Line® to find out.
Credit Scores and Car Loans
Think of your credit score as a numerical grade for your overall credit. Credit scores are calculated based on several different factors, including how many accounts you have open, the balance for each account, and your payment history. It also factors in how many times you have applied for a new credit account within a specific period.
If the balances on your accounts are low, you pay off your bills in full and on time, and don’t apply for too many new accounts at a time, your credit score should be relatively high depending on how long you’ve had some of your accounts open.
When you’re buying a used car, your credit score and history can help determine the types of loans and interest rates you can qualify for. Typically, those with higher scores (around 700 or higher) may be approved for lower interest rates and more financing options.
How to Check Your Credit
Before you head to the dealership to buy your used car, it’s best to check your credit score and history. Knowing your credit beforehand allows you to create a more accurate budget since it helps you see what types of loans you may be approved for.
You can check your score through many programs and websites. You can even get your score through select banks. However, if you want a little more detail and context to the number that you see on your reports, you’ll want to check AnnualCreditReport.com.
AnnualCreditReport.com is resource guaranteed by federal law. It allows you to pull your credit report once a year from all three credit bureaus and includes more detailed information on your accounts and payment histories.
Credit Score Tips
A higher credit score can be beneficial when it comes to financing your used car, but you can still get good rates for your car loan even if you have bad credit. Lots of dealerships, including Val-U-Line®, can work with all drivers to secure the best rates for their budget.
However, it’s always best to try and build your score up to help you get the car you need now and the car you need in the future when you’re ready to upgrade.
If you have bad or no credit, here are a few tips that can help you increase your score and drive home with the affordable financing you want.
- Keep Your Credit Account Balances Low. Ideally, the balance for each credit account you have should be no more than 30 percent of the maximum credit limit. If your balance is a little high, try to pay off as much as you can and limit your use of it.
- Pay Your Bills on Time and In Full. Your payment history can affect your score significantly, so be sure you’re making payments on time. If you can, try to pay the statement balance in full each month, as well, to boost your score.
- Don’t Open Too Many New Accounts. With every new account you open is a hard credit check. Hard credit checks occur when lenders look into your credit to see if you can be approved for a loan or credit card. Too many hard checks can lower your score, so try to limit your applications to no more than two within two years.
- Keep Your Old Accounts Open. While it isn’t as big as a factor as your payment history or credit balance, the age of your credit accounts can help increase your score little by little. Those with older accounts have more established credit, which can make it easier to be approved for the car loan you need.
- Get a Cosigner. If you need a used car immediately, having a cosigner can help you find the financing you need for your budget while building your credit. A cosigner signs the financing contract with you and assumes responsibility for the loan if you are unable to make payments. The loan affects both your scores, so you want to make sure you’re paying it on time each month to keep your credit in good standing.
Questions? Contact Us!
Your credit score can affect your car loans, but when you go to a helpful dealership like Val-U-Line®, you can get the financing you need even if you have bad or no credit.
To learn more about how your credit score plays a role in financing your next used car or to apply for your car loan, contact our used car financing experts today!