Only a small minority of car buyers in the U.S. have, what can be considered, perfect credit – roughly 10%. This means only one in ten car buyers will qualify for the best possible car loan deals. This doesn’t mean that people with average to better-than-average credit get screwed out of loans with good rates and reasonable terms. In fact, the car loan market is aiming for this large demographic when it advertises it’s financing deals.
What’s the score? Your first obligation to yourself is finding out what your credit score is before you head off to get that car loan. Once you know where you stand in the credit world, there are very few things that can take you by surprise when you start searching for good rates and terms. Although different lenders interpret credit scores differently a score of 620 is usually considered the dividing line between who gets a “prime” and “subprime” loans. The simple fact is the higher the score, the better.
If you find yourself wishing you had a better credit score, there are ways to improve it and improve your chances for getting a good car loan. Get a copy of your credit report. Unlike you credit score, your credit report is a detailed history of your debts, repayments, and delinquencies. Since this is pretty comprehensive document, it can contain inaccuracies. Study this document carefully and, if any errors exist, you can dispute them and have them corrected. This is good first start to improving your credit.
Pay down your debts. If you have outstanding debts, get them under control before you even consider a car loan. Over time, paying off credit cards and other debts will dramatically improve your credit score putting you in a much better position for good auto financing. Also, there’s another advantage to paying down your debts. Your lender will examine your debt-to-income ratio meaning that it will look at how much money you owe versus how much money you bring in. Reigning in your debt so your income more than covers what you owe offers clear evidence to a lender that you’re responsible with your finances. This leads to a better chance at getting a car loan at good rates.
Perfect credit is not a must for a decent car loan deal. But, to qualify for the best car loan offers, it’s a big help. Take the time – and, it does take time ‒ to improve your credit score and move yourself closer to better auto financing. Join the top 10% and get a good handle on your debts and a well-planned budget, you’ll find yourself moving closer to new car. Perfect credit is possible.