Evaluating your credit score is very important just before you start shopping for Auto loans. When you have a history of making late repayments, you may find it difficult to get an auto loan approved. Minor issues such as changes occurring on your credit score from shopping expenses, can be a minor price to pay when you shop for auto loans.
There are several factors that affect credit scores , which in turn affect approval for auto loans , and the most prominent of such factors is Payment skipping. Making prompt payments on your credit card have strong positive impact on your credit score or rating, and when you have outstanding loans, your Auto loans may never be approved. If you manage to get an auto loan approved despite your late payments habit, then your credit score will drop further until all outstanding debts are repaid. Skipping payments is completely unacceptable to most auto loan givers( a payment is usually considered as being skipped if it is repaid after 60 days). If you make few late repayments, your prospective Auto loan lender may not flag a late payment to the credit bureau and your credit score may not be affected negatively.
It is very important that you understand how lenders Interpret credit scores. As a point of reference, Auto loan lenders will consider a score of between 850 and 740, as an excellent credit score and you may be charged up to 3.2% interest rate on the average. A score of between 739 and 680 is considered an average credit score and your Auto loan may attract up to 4.5% average interest rate.A credit score of 680 or below is considered as a poor or sub-prime credit score , and if you manage to get an approval for Auto loans, then you should expect an average interest rates of between 6.5 and 13% on average.
Most lenders often provide an optimal range for the approval of Auto loans. In order to get your auto loan approved successfully, you should aim at a credit score within the 740 range and if you can’t afford such a high credit rating, you should at least make it to the 600+ range, even though the interest rates you will pay on such loan will be higher.
Defaulting on a loan is a situation you would like to avoid if you are seeking approval for an Auto loan, defaulting does not only ruin credit scores, it may appear on your credit history for years and such could be a long time to pay for your mistakes. If you have an average credit score range of between 680 and 740, your approval of Auto loan may take a longer time because such credit score is considered to be a risk to the lender. With a credit score of 700 and above, most lenders wouldn’t waste time approving your auto loan , therefore it is quite important to build a better credit rating or score before applying for an Auto loan.
