Understand How Your Credit Score Influences Your Loan Terms
Since your credit rating determines what kind of interest rate you’d qualify for, check out your credit score before applying for a loan. If you would like to be walked through the process of checking your credit score, see “Check My Credit Report and Score.”
If your credit score is 700 or more, lenders will give you the most favorable APR. If your credit score is in the 600s, you’re more likely to be offered loans with higher APRs. If your credit score is under that you’re considered a credit risk—and will pay substantially higher interest rates as a result.
Note that the lender takes more into account than just your credit score when deciding whether to give you a car loan. In addition to a credit score, a credit application asks for your present and past addresses (to establish how long you've been in an area), occupation and employment history (same reason as your addresses, plus to estimate your annual income), additional sources of income, and all loans and credit cards you have.
If you have bad credit, some lenders will give less weight to your credit score and more to your current occupation/salary and whether you've shown a recent history (the last 90 to 120 days) of paying off credit cards and other loans on time. Some lenders will make a car loan if you put up the title to your car or other property as collateral, but we don't advise it. (It's risky; if you miss payments you could lose your car or other property). Some will make home equity loans to pay for a car, though again, financial experts DO NOT recommend it.
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