New Car or Truck Loans and Your Credit Score

If you’re in the market for a new car or truck, you are probably excited to choose the model, the paint job, and all of the accessories that come with the vehicle. However, your ability to finance the vehicle is just as important – if not more important – than all of the cool details and add-ons.

Most people opt to purchase a new car or truck through financing, which is the process of paying for a vehicle with loan installments. Financially, this is a much more manageable method of vehicle ownership than paying for a vehicle in one giant, multi-thousand dollar lump sum.

You can obtain a car or truck loan directly through your dealership of choice; through a bank, or through a private individual. Each method of payment comes with inherent risks and rewards (for example, loan rates through banks can be higher – but you might not have legal recourse, should there be an issue with a private or family loan). Before deciding upon a loan type, these risks and rewards should be weighed carefully.

For many Americans, though, the biggest risk factor when purchasing a new vehicle is whether or not they will actually be eligible for the loan in the first place. An individual’s credit score determines his or her credit-worthiness – this number will tell the lending institution whether or not that person will reliably make car or truck payments. The lower your credit score, the lower your chances are of securing a loan at an affordable rate. In fact, some people with especially bad credit scores might find that they are having trouble securing a loan in the first place.

What is a credit score, and how does it affect your ability to secure a new car or truck loan?

Kenneth Elliot wrote in the Mar. 21, 2008 edition of the American Chronicle, “…[T]he FICO score remains a primary tool for lenders. It may not determine the final decision, but it definitely influences the ‘first cut’ when presented with a stack of applications to approve or disapprove.”

FICO stands for the name of the consulting firm that developed standards for credit score calculation, the Fair Isaac Corporation. The FICO scoring rubric is the method most commonly used to determine an individual’s credit-worthiness. In the United States, credit bureaus or credit reporters analyze an individual’s financial past – debts, loans, utility bill payments, previous car loans or mortgages, and more – to determine whether he or she is a good lending risk. A FICO score ranges from 300 to 850. 850 is the highest credit score possible; individuals with high scores have little or no trouble securing loans. Conversely, credit scores near the lowest end of the FICO score range indicate individuals who are high-risk borrowers; these people usually have extreme difficulty managing their debts.

CNN Money reports that the average American carries over 9 thousand dollars in credit card debt. Late or missed credit card payments are one of the biggest factors that lower individual credit scores. Many people spend more money than they actually make, and become attracted to the allure of credit-based purchases — which seem like easy money at first. Those individuals with high debt-to-income ratios might not be able to afford monthly credit card payments. After a few months of missed or late payments, an individual might find that his or her credit score is surprisingly low.

The FICO credit score is determined by a sum of factors. Each factor of a person’s credit history is given a different weight in the final evaluation of his or her financial situation. When determining a credit score, the greatest weight is given to the individual’s debt and bill payment histories (Is he or she timely or perpetually late?) and the total amount of debt he or she carries. Less important – but still contributing to the final credit score – are an individual’s credit history length; the types of debts he or she carries, and how often he or she has applied for new credit. Individuals who make timely bill payments, who have established long credit histories, and who have demonstrated convincing abilities to manage debt often have the best credit scores.

Before you are eligible for a car or truck loan, you will be asked to supply your lending institution of choice – be it the car dealership, the bank, or a private individual – with some information about yourself. Information required might include complete contact information; a social security number; details about your mortgage or apartment lease, and employment records. The lending institution will turn your information over to one of three credit reporting agencies – Equifax, Experian, or TransUnion. The credit reporting agency uses the FICO algorithm to determine your credit score.

If your credit score is less than stellar, don’t despair. You might still be able to finance a new vehicle. Remember: You always have two options when it comes to pitting a bad credit score against stringent car or truck loan terms. You can work to improve that score, or you can shop around for lenders who are willing to work with you. However, if your credit score is good, then you are a preferred borrower, and you will probably be able to get loans with attractive (meaning low) interest rates. Go out there and get that new car or truck loan!

Fight Your Bad Credit Score to Earn Your Dream Car

Life is way too short for a bad credit score

Let your car dreams soar!

There are smaller things in life you never really care to enquire about. And why would you? There is so much going on in the world. Especially when you want to buy a car, you are so occupied with the selection of the car’s model; your eye gives credit score a miss. Don’t ignore your score because it might be the only reason you still don’t own the car. Start to improve your score today and earn your dream car!

It is not a perfect world in which you can easily buy your dream car with cash. You need an auto loan to buy a car. Your credit score will ascertain your chances of getting an auto loan. A bad credit score may pose as a challenge but do not worry. It is a temporary issue. Don’t put your car dreams at rest. Allow it to soar.

If Not Now, When?

Your credit score is important. And you may not notice how much a bad credit score can affect your dreams until it’s too late. Don’t wait for the time to teach you the importance of score.

The sooner you begin fixing your score, the better it will be for you. So get your plan together and get to work. It will take some time and effort but having a good credit score is now possible.

· Check your Credit Reports

Check your credit reports with all the major credit bureaus. It will enable you to see any errors which might prevent the lender from giving you the best interest rates. If you spot any error, dispute it and have the item removed from your credit report.

· Stick to your Budget

Work out the math. You know what you make and how much it costs to keep up with your regular bills and expenses. You also need to set aside money for making regular payments towards your auto loan. Making late payments can hurt your score. Reduce expenses so that you do not have any problems in managing the auto loan.

· Use Credit to build Credit

The best way to build a good credit score is to apply for an auto loan and pay it back on time. Purchase your next vehicle with the help of a bad credit auto loan. There are special lenders who look at factors beyond your score in order to approve your auto loan request. Once you buy your car, you can make timely payments to boost your score.

Remember that your score needs time to improve. So, it is better to get started now. Let today be the day to fight your bad credit score. With time, your score will heal and you will be the owner of your dream car.

Your First Car Loan Will Help You to Build Your Credit Score

Buying your first car is an exciting experience. But, to buy your first car, you need to apply for your first car loan. And for getting the loan, you need a good credit score. But, what if you have zero credit score? Don’t worry. You can approach the lenders who help first time buyers. With the help of a specialized lender, you can buy your first car. And, by making timely payments, your credit score will improve as well. It’s like killing two birds with one stone!

Car Shopping Tips for First Time Car Buyers

· Consider your Lifestyle

The car market is a vibrant market with several options. A different car is available for each income group. If you are confused about choosing a car, your lifestyle will help you in defining your car. Do you need a fuel-efficient vehicle or a vehicle that has backseat space for the kids? The choice remains with you.

· List down the Car Models

Make a list of car models based on your requirement and budget. Which type of car pleases you and your family? Is it a sedan, a hatchback or an SUV? You should take into consideration various factors such as family size, utility, road conditions etc. before making a decision.

· Prepare a Budget

Inspect all your financial resources to calculate your budget. The price of the car isn’t the only cost that you need to consider. You need to remember different costs such as insurance, fuel, maintenance and loan payments.

· Apply for your First Car Loan

Shop around for the best interest rate. First car loans are available at banks and dealerships. And, due to competition in the financial market, the interest rates are quite low. Thus, affordable interest rates will make becoming a car owner affordable for you.

Look ahead: How to get your First Car Loan and improve your Credit Score?

When you are buying a car for the first time, you may explore various financing options. As you are a first time buyer, you are likely to have zero credit score. Therefore, qualifying for your first car loan can be difficult. But, there are a few things which will help you in buying your first car.

· Pay a large down payment to the dealer. It will enable you in obtaining the best interest rate. As a result, your monthly payments will become manageable.

· Using a co-signer will significantly increase your chances of getting approval. The creditworthiness of the co-signer will help you in buying your first car.

· Search for specialized lenders. There are people who provide loans even when you have bad credit history or zero credit score. Compare various financing options available to you and choose the right one!

· If you are loan application is approved, make timely payments because it will help you in building your credit score.

When you are a first time buyer, buying a car can be an uncertain process. And, trying to obtain your first car loan will contribute to the feeling of uncertainty. But, when you are persistent, nothing is impossible. Shop for your first car loan today and buy your first car. It will provide you the opportunity to build your credit score.