You are ready to buy a car but you are not sure if your credit score will keep you from getting your dream car. Well, your credit score won’t necessarily keep you from buying the car of your dreams but it will certainly affect what your interest rate and the amount of loan you can get. Find out what credit score is needed to buy a new car so you can get your new wheels without worry!
Your Great Credit Score Will Give You The Best Auto Loan Terms
You will need a credit score of 719 or higher to get the best rate and terms to buy a new car fresh off the lot. For used cars, a minimum credit score of at least 655 is typical to buy your new-to-you vehicle at the lowest rates.
*Source Bankrate
Buying a Car with Low a Credit Score
People with low credit scores can still buy a car or even get a car loan. Just be prepared and know how much you can afford and how much your interest rate will be. We’ve seen new car loans rates for up to 15% interest rate and used for up to 20%, for extremely poor credit. Although depending on the car and your actual credit score, these rates may be much lower. The interest rate on a new car is generally lower than a used car. If you take some preparations now before you shop you can get the best interest rate for your credit score. Plus you’ll have a monthly payment you will feel comfortable with!
Just remember that it’s not just about the monthly payment but about how much the entire car will cost. That’s why it’s important to get the best terms possible.
What to do if your credit is low…
If your credit score is less than stellar, don’t despair. You can start now to make some changes to bring it up quickly. In the meantime if you don’t have the luxury of time to bring your credit score up, you can still get a car loan. Although you probably will be paying a higher interest rate. Don’t worry though, many people refinance their loan shortly after they get one.
Take these steps before you start Shopping for your New Car
Check your Credit Score and try to improve it any way you can.
By law, you are entitled to one free credit report per year by each of the big three credit bureaus, Equifax, Transunion, and Experian. Check the reports to make sure they are accurate. It’s also a good starting off point so you know what to expect when you are shopping for financing.
Easy things like paying your bills on time, pulling your credit report and disputing any errors, paying down your balances, and avoiding opening up any credit cards a few months before you shop for a new car will help boost your credit score.
Research Auto Loan Lenders and Rates
Your best bet is to research different lenders and rates before you go. Often times the dealer will try to get you to apply for their in-house loans. Some of them may be a good deal and others may have hidden fees or take away potential discounts and savings on the price of the car.
Credit Unions usually have fantastic auto loan rates. Some Credit Unions are hard to join but others can easily be joined by contributing a small donation. This can definitely offset the savings you will get from belonging to them, not to mention, usually they have great personal customer service.
If you have bad credit, research lenders that specialize in borrowers with lower credit scores. We’ve included a couple of lenders below who specialize in auto loans for people with bad credit to help you get started.
Credit Lenders for Bad Credit
Know How Much You Can Afford
Going in knowing what your price range is and how much you can afford will put you in the right mindset and keep your expectations in check. It’s exciting to look at and test drive new cars with their new car smell and beautifully clean interiors, but you want to be realistic when making your final decision. Using a car loan calculator will help you get an idea.
Save Now for a Down Payment
Your credit score and history will determine how much of
Research Your Trade-in Value
If you have a car to trade-in, researching is going to be your best friend. Check sites like KBB and Edmunds to determine how much you could potentially get from the car dealer. Be realistic when trying to assess how much you’ll get for your car. If the car has a few dings on it, don’t report in excellent condition. That way when you are trying to figure out how much your car is going to really cost in the end, you will truly understand how much car you can afford and what your monthly payments will be.