Loan Rates by Score
The better your credit score, the better deal you will get on a car loan.
But a lower credit score won’t necessarily mean you won’t be able to buy a car with the loan; it just means you may be subject to a less advantageous rate than those with a higher credit score.
So, how exactly do the loan rates differ by score?
- Those with credit scores of 780 or higher were eligible for rates of 4.23% and 4.77% for new and used cars respectively.
- Those with a score of 661-780 had rates of 5.17% for new cars and 6.54% for used cars.
- Those with scores from 601 to 660 found rates of 8.12% (new cars) and 11.38% (used cars).
- Those with a credit score below 500 could expect rates as high as 20%. This is due to the security of the loan offered.
How Is Your Credit Score Calculated?
Understanding how steep your rate for a car loan could be if you have a low credit score will inspire anyone to want to know what their credit score actually is.
So, how do they calculate your credit score? Firstly, your borrowing is tracked by the main awarders of the credit scores.
Your credit score is an amalgamation of the reports of your borrowing.
The number enables lenders to quickly assess the viability of a variety of loans.
FICO scores are the most common, but there can be some discrepancies between the agencies that issue the reports.
However, this won’t affect your credit score by that much.
How Can You Improve Your Credit Score?
Let's say that you've checked your credit score and find that it is lower than you’d like, or that you’re just under the threshold for the next rate.
What can you do?
There are actually a few ways we can improve our credit scores in order to prove that we are better borrowers than it may appear, and build up trust again.
The most important thing to impact credit scores is late payments.
So, you'll need to make sure everything is paid on time.
Begin by paying off at least the minimum amount required on credit card payments.
Don’t max out your credit card, or if you do, try not to do so regularly. This is a sign that your outgoings are dangerously close to superseding your incomings.
If you have an old credit card you don’t use, don’t close the account.
This will shorten the lifetime of your credit card and may impact negatively on your credit score.
The credit score you have will give you a range of different rates for car loans in 2020.
The higher the score, the better these rates, so it’s a good idea to try to improve your credit score in the months before applying for a car loan.
While a low credit score won’t bar you from getting car loans, it could end up being prohibitively (or just undesirably) expensive, so it’s always important to check the rates for a variety of different lenders before committing to one.
Ultimately, your credit score shows how reliable you are.
However, there are often a few more factors that come into play.
For example, if your salary increased massively between the last time your credit score was reported and when you try to take out a loan, this will eventually affect your rating - and, of course, your borrowing ability.