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.
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.