When you’re in the market to purchase a vehicle, everyone desires the best possible deal. There’s more to securing a great deal than just adept negotiation skills; it also includes obtaining a favorable interest rate on your car loan. However, this largely relies on a good credit score. Understanding credit score ranges and strategies for enhancing your score will help in securing a more competitive interest rate.
EFFECTIVE STRATEGIES TO SAVE ON YOUR CAR LOAN
For a comprehensive understanding of what constitutes a good credit score when purchasing a car, myFico.com is a great resource. The site offers a useful calculator that shows how a better credit score can result in substantial savings. Based on national averages, a credit score over 720 can grant an interest rate of 3.201% for a new vehicle financed on a 48-month term.
Fair results can still be attained with a credit score ranging from 690 to 719, with an average interest rate of 4.549%. As per myFICO.com, other indicative interest rates based on your credit score range include:
660 – 689: 6.618%
620 – 659: 9.736%
590 – 619: 14.014%
500 – 589: 15.428%
Individuals with credit scores under 620 are likely to face interest rates above 9% on their car loan. Additionally, securing a car loan may become challenging with a credit score below 600. Some dealerships may still offer financing, but this often comes at a steep cost in the form of high interest rates, which results in spending more overall.
ENHANCING YOUR CREDIT SCORE
Before purchasing a car, it’s advisable to review your credit score. This not only allows you to estimate what to anticipate but also highlights areas requiring improvement before applying for a car loan.
It’s worthwhile to pay for your credit score, as this knowledge can be crucial. Additionally, review your credit report for any discrepancies and rectify them. Issues such as identity theft or reporting errors can negatively impact your credit score.
Other strategies to improve your credit score include:
– Being consistent and timely in all your payments.
– Actively reducing your outstanding debt.
– Retaining older accounts active until after the car purchase to portray an extensive credit history.
An improved credit score will allow for a more advantageous outcome when buying a car. If you haven’t reviewed your score recently or it’s been over a year since your last review, click below:
