Category Archives: Credit & Auto Loans

How Your Credit Score Could Affect a Car Loan

Is there a connection between your credit score and your ability to get a car loan? What if you’re trying to buy a car even though your credit is less than perfect? Here’s what you need to know about credit scores and car loans.

What do I need to know about credit scores?

First, the basics about credit scores. Your credit score is a 3-digit number that will fall between 300 and 850, with 850 being a perfect score. This number is calculated based on your financial history, which is comprised of factors like your ratio of debt to available credit; the length of your managed credit history; the number of credit types you’ve managed; your recent credit inquiries; and your bill payment history. You can get your credit score for free by contacting one of the 3 major credit bureaus—Equifax, Experian, and TransUnion.

For a more detailed breakdown of credit scoring, see our articles about Understanding Credit Scoring and Tips for Improving Your Credit.

How are credit scores and car loans connected?

Your credit score helps lenders determine whether it may be a risk for them to lend to you. A higher credit score indicates better reliability, since lenders are considering your past financial activity to be indicative of your future activity. As such, a lower credit score may mean you’ll be charged a higher interest rate for your car loan (we’re talking up to 20%). Does that mean there is a minimum credit score to get a car loan? Not necessarily. It will vary from lender to lender.

Can I still get a car loan with bad credit?

It’s certainly possible to figure out how to get a car loan if you have bad credit—you just need to go about it the right way. One of the best things you can do is partner with a specialized lender that is willing to work with customers who have bad credit. To find one, start with a bad credit auto loan direct lender like myAutoloan.com. This will allow you shop around and get multiple offers to find the right lender for your situation.

Want a full breakdown? Read our 5 Steps to Find a Car Loan with Bad Credit.

Interest Rates and Your Credit Profile

Interest Rate Estimator

What Your Interest Rate?

FAQ’s on Interest Rates
The most often asked question we hear from our customers applying for an auto loan or refinance auto loan is, “If I apply what interest rate will I be approved for?” Interesting question with so many answers. First, you have to actually apply before we or any lender would really know. No reputable lender can answer that question without you actually applying and pulling your credit report and credit score.

At myAutoloan.com we’ve built a tool to help answer this question. Our Interest Rate Estimator tool calculates probable auto loan interest rate outcomes based on four quick questions. This tool returns a range of interest rates from Lowest APR to Highest APR along with the Average APR for your credit type all based on recent data. With this Interest Rate Estimator tool you will have a good understanding of where you stand with us and the many lenders represented on our marketplace lending platform. Additionally we publish our Today’s Lowest Rates chart that provides you with the lowest possible interest rates segmented by loan type and by loan term that you can obtain when applying at myAutoloan.com.

Second most often asked question is, “I know my credit score, what will my interest rate be if I apply?” Credit score also known as FICO score is not indicative or directly related an interest rate. Most lenders today utilize custom score cards, meaning they analyze your application attributes along with your credit report and historical customer behavior data to calculate their own score. This custom score is directly related to the interest rate, loan term and conditions a lender may use to decision your loan. Once again our Interest Rate Estimator takes a similar approach and provides you with a range of possible interest rate outcomes.

We hope you find this information helpful. Remember you can apply online at myAutoloan.com at any time online 24/7.

Credit Score Facts – Inquiries on CB Report

We get asked a number of questions about inquiries relating to credit bureaus. For example: Is it true that if your credit has been checked too many times it could affect your score?

Another question that we regularily get is: How many times can we check our credit without affecting the score?

Although it’s true that your credit score may fall slightly (2-3 pts) following some types of credit checks, experts and credit bureaus all say that when you shop around for auto, student or mortgage loans during a short time frame, it results in a single inquiry. If you have good credit, multiple inquiries may have zero effect on your score. Credit cards are a different story but we are primarily talking about auto loans and getting pre-approved for auto financing here.

To prevent credit score damage due to multiple hard inquiries over a short time period, scoring models recognize that borrowers often shop around for the best loan. We call it “Smart people Shop” so why would you get a lower score for being smart? You don’t! “Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan,” FICO’s consumer information advisor explains. For purposes of calculating the credit score, “inquiries for mortgage lending and auto finance (new, used & refinance) purposes within a given period of time, generally 14 days, are counted by credit scoring systems as a single inquiry,” says the director of public education for credit bureau Experian. We have heard this ourselves, directly from each of the credit bureaus and have posted this fact in our FAQ’s and on our website. “There is no limit to the number of inquiries for those purposes,” he says.

While auto, mortgage and student loan applications over a brief period are treated as a single inquiry, that isn’t the case for credit cards. For consumers, “this means that each additional credit card inquiry can potentially hurt your score — although by less than 5 points each in most cases,” says the consumer operations manager for myFICO .Com. “For this reason, randomly applying for credit cards is not a good idea. Instead, when credit card shopping, consumers should first do their homework by comparing rates, terms and features being offered by lenders, and then only apply for the cards that best meet their needs.”

Still, it’s unlikely that credit checks will prevent you from borrowing. “Inquiries alone will never be the reason an application is declined,” he says. That means as long as your credit report shows a record of on-time payments, you don’t need to worry much about having your credit checked from time to time.

Auto Refinancing

How Your Credit Score Affects Your Car Loan Rate

Credit Score And Your Car Loan Rate

If you are thinking about purchasing a car, you will need to find out about your own credit score as this can have an effect on the out come of obtaining an auto loan.  Since you already know you will need some funds to buy an automobile, you will need to get auto financing – and you will want to know just how your credit score affects your car loan  rate.

Your score can consist of several factors and one of the most important is your payment history.   Any late payments or missed payments you have had will certainly have an effect on your rating and thus your credit score.  Also, all of your credit card balances are taken into consideration whenever loans are being estimated.  There are a few other things as well that are taken used in determining whether or not you can obtain any auto loan, like checking and saving accounts and any personal loans or any mortgage payments.

One good reason why having a good history of credit is so important is that it will certainly determine any eligibility you have for a car loan.  This can also have an effect on the interest rate you will be charges to secure your loan.   Your ability to pay off the car loan is evaluated along with any money that you may have borrowed and now need to pay back.

Any loan interest rate will be dependent upon your history of your credit.  Interest rates are lower for the people who have a good history of credit.  In most cases, people who have an average or a low credit rating, will need to pay a higher car loan rate towards the interest on a loan.

Whenever you go and apply for auto loans with any dealership, they use a credit report.  Then according to your credit score, the dealer will make a lending decision and interest rate based on your score.  They usually mark up the interest rate so consider using a direct lender and finance outside of the car buying efforts.  The thing to remember is that all dealerships will charge you a higher rate  of interest on any auto loan.

The credit rating that you have will make all the difference in whether you can be approved for your auto loan and what the interest rate will be.  It may be worthwhile to check out car buying tips to help save you the most cash or tips to improve your credit.  It is highly recommended that you try to keep any credit you have in good condition by paying your bills on time.  The score of any credit report will always be the deciding factor in determining your eligibility for a car loan and the rate that you will pay.

Tips and Tools:
Car Buying Tips

Auto Loan Calculator

Tips to Improve Your Credit

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