Know what kind of borrower you are
To know what type of borrower you are, the first step is getting your credit scores. The higher your score, in most cases, the better your loan terms will be. Conversely, the lower you score, the worse your loan terms will be.
If you don’t know your credit scores or haven’t checked them in a while, you should probably get them now just to know where you stand. Note that getting your free credit scores does not affect your credit score in any way. To get your free credit scores right now, simply click the link below:
Your credit scores will, essentially, place you into one of three categories based on how high your score is. The three basic categories of borrowers based on credit score (similar to Experian’s five categories) are:
- Prime Borrowers
Generally, people with a credit score of 661 or greater are considered “Prime Borrowers”. These folks typically get the better deals in terms of financing and in interest rates.
- Sub-Prime Borrowers
People with credit scores below 660 are generally considered “Sub-Prime Borrowers” and will pay a premium to get financing for a loan. In general, this premium is much higher than if you are a Prime Borrower.
- Shafted Score Borrowers
People with a credit score below 560 have what is called a “Shafted Score”. It is highly unlikely that you will qualify for an auto loan for a new car with this score. You’ll also pay much higher interest rates and unnecessary fees.
If you have a lower credit score and have tried to apply for credit, then you know how important that score is in terms of how much you can borrow and what rate you’ll pay to borrow that money. That means that your credit score will actually affect things like how big a home you can live in and where that home will be, the type of car you will drive, and, as a consequence, how much money you’ll have available to you after borrowing money.