Credit Scores and Car Loans

Like other loans, credit scores affect car loanshistory, this score will begin to increase.
too. The higher your credit score is, the lowerAuto lenders adjust their interest rates based on
your auto loan interest rate will be. One biga "range" of credit scores. If your score falls
mistake car buyers make is shopping for a carwithin that range, you will be offered the interest
without knowing their credit score and loanrate for that range. In most cases, interest rates
qualification amounts. Many times dealers baitdecrease by up to 4% for every 20-40 points
buyers in with promotions that offer new caryour credit score increases. (For example, a
financing that includes 0% introductory interestlender will offer someone with a score in the
rates and low monthly payments. You need torange of 620-659 an interest rate around 13%
know your credit score before you get excitedwhile a person with a score in the range of
about the promotions you see in the newspapers660-689 will be offered a rate around 9 or 10%.)
and on television. What people don't realize isNo matter what your credit score is, you should
these rates and payments are for people thatpull your classic credit report at so you can
have superior credit scores, not for the masses.ensure that it is correct, and so you will know
Another score that may affect your car loan iswhat overall information lenders will be looking at.
an enhanced score called the "FICO Auto IndustryThen, you should pre-qualify for your car loan and
Option". This is different from your normal creditget your financing worked out before you go
score. The auto industry option is only available tolooking for a car. This way, you know the loan
car dealers and auto finance companies.budget you will be working with and the monthly
Unfortunately, it is not available to you. The majorpayment you can expect.
difference between this one and your standardWhen you have your loan financing done, you
credit report is the auto industry one rates youessentially walk into the dealership with "cash in
on how you have handled your previous car loans.hand". This gives you great negotiating power and
If you have bad credit, but you are creditworthyleverage to insist on fair pricing. Shady salespeople
according to how you paid your previous carcannot sneak extra commissions into the price of
loans, you may be dealt a better lending hand. Ifyour car if your loan is already covered before
you are a first time buyer or have no previousyou walk in the door. As they say, "money talks".
auto financing on your credit report, you mayYou are more likely to strike the deal you want
score low on this one even if you have anwhen you already have the money in hand. It is a
excellent "classic FICO" score - but you should notpowerful position to be in.
be discouraged. As you build a positive repaymentKen S.