What Credit Score Is Needed To Buy A Car?
When it comes to financing a new or a used car, one needs to have a closer look at their credit score. A buyer’s credit score is used by the lenders to determine the rate to be given on the loan or to give a loan at all. This doesn’t mean you have to lose hope. Despite your credit score, car dealers are trying hard to sell you a car. But the question still lingers, what credit score is needed to buy a car?
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What credit score is needed to buy a car?
The true fact is that there exists no minimum credit score to buy a car. You won’t believe that a greater than 20% of car loans are given to people having credit scores below 600. And, people with a credit score below 500 make up nearly 4%.
Yes, a person with higher credit score will obviously get a lower interest rate with less paperwork required. So, where to draw the line?
According to Mike Bradley, Internet Sales Manager at Selman Chevrolet, Orange, California, a score below 700 invites questioning about the negative items on your credit report. You must be prepared to show proper documents for your answers. He admits having seen people with a much lower credit score getting “top tier” financing.
If you are still thinking about what is the exact score below which it’s a complete no-no. Prepare to be astonished. According to Dave Cavano of Auto Club, Southern California, there is no such number but in case the score is below 500, it will ring the bell.
To simplify it more, whatever credit score you have, you can get a car, but the rates will be higher accompanied with a lot of questioning and paperwork if your score is not good.
Sit-rep at the finance office
As stated by an Experian report of 2016, the average scores for borrowers were 711 for a new-car loan and 654 for a used-car loan. Despite this, a lot people with a number of negative items on their credit report get approved for car loans on a regular basis.
How does this happen? Consider this- A person having a low credit score due to a business debt but has been paying his car payment for 15 years, stands a chance to get approved. In case you pay nearly 25% of down payment and have a steady job with your own house, getting financed is within reach.
As mentioned earlier, car dealers are dying to sell you cars. Continuing the point, big dealerships are in constant contact with lenders who specialize in financing people with credit problems.
Before you step into the shop
If your credit score falls anywhere between 300 and 500, you must take solid steps to better that score. This will only help you to get the cheapest possible financing. But How To Raise Credit Score By 200 Points?
Some ways to get you start improving:
- A low credit balance is always helpful.
- Bill payment should be on time.
- Credit report occasionally has errors in them. Checking your credit report will be helpful.
- Decide when you need a new credit, only then open it.
Filter for the best financing
It is helpful to acquire quoted interests from a number of lenders and then look for the lowest one. It is the difference in the interest rate that will benefit you in the long run.