Does Credit Score Affect a Buyer’s Ability to Purchase a Car?
Are you worried about whether your credit score will affect your ability to purchase a car? We understand. The good news is a less-than-perfect credit score probably won’t disqualify you from getting a car loan, but it can affect the terms and interest rate on the amount you borrow. Even if you need to pay more at the beginning of the loan, there are ways to reduce the interest you pay over time.
Is There a Minimum Score to Qualify?
There’s no universal minimum credit score a lender requires for a car loan, but the average score for a new car is 715, and 661 for used cars. Lower credit scores do tend to result in fewer offers and higher interest rates. Don’t let a lower credit score deter you from applying for a car loan. One of the auto loan specialists at Clark County Credit Union can explain potential barriers, the ways you can increase your chances of approval, and even show you how to get pre-approved for a credit union auto loan before heading out to shop for a vehicle.
How Does a Credit Score Affect Your Car Loan?
It’s always a great idea to check your credit score before car shopping. It’s also an opportunity to check the report to make sure there are no errors bringing your score down. There are two ways your score affects obtaining a car loan:
- According to credit reporting agency Experian, about 40% of lenders will not approve a car loan for anyone with a score of 660 or lower.
- The lower your score, the higher the interest rate you’ll be offered. In 2018, the average loan interest rates for new and used vehicles were 7.52% to 18.98%. That’s compared to interest rates of 3.68% to 5.97% for people with higher scores.
While a few extra percentage points don’t seem like a big deal, when applied to the amount of money you’re borrowing, it can result in a much higher monthly payment and thousands of dollars more in interest payments over the lifespan of a typical 5-year loan.
Your Car Loan Options
If you can delay buying a vehicle, there are a couple ways to save on your car loan:
- Work on your credit score to get it higher and unlock lower interest rates.
- Unless you’re trading in a car that’s worth significant cash, it’s best to save as much money as possible for a down payment.
Need a car now?
- Take the loan at the higher rate but continue to work on your credit and then refinance once your score improves. Keep in mind that staying current on your car payments will help improve your score.
- Consider having a co-signer on your loan.
No matter which option you choose, be sure to shop around to find a rate and terms that work for your current financial situation. Clark County Credit Union offers a variety of FREE financial resources with Banzai, our online resource center to help you meet your financial goals. For questions, you can give us a call at 702-228-2228 or come into a Las Vegas location.