What is the required credit score for car loan? If you are thinking of taking an automobile loan, then it is necessary for you to think about it. This will be an important issue for you. But even before we go into that, it will be useful for you to have some information about what credit score is and why you should be worried about this when you are seeking a loan.
What Exactly Is a Credit Score?
A credit score is a measure of your credit worthiness. You should know that all your financial transactions are being noted by the three credit bureaus in the US. These agencies can legally collect and maintain your records. Based on your pervious loans and repayment history, credit card usage, timely payments or late payments, defaults and such others, these agencies will give you a score. When you apply for a loan, the lending company will ask for your score from these agencies. Whether your loan will be approved or not, and if it is approved then the rate, will be determined by what your score is. If you have a good score, then you can expect the loan to be on friendlier terms. It applies for all types of loans, including automobile loans.
Here is the assessment of your score.
- 720 or more than that – Very good credit score.
- Between 680 and 719 – Good credit score.
- Between 640 and 679 – Marginally good score.
- Between 600 and 639 – Below prime score.
- Between 580 and 599 – Poor score.
- Between 525 and 579 – Bad score.
- Between 480 and 524 – Very poor score.
The lending company is sure to check your credit score for car loan. All lending companies are sure to do this. And as mentioned before, if your score is good, then it will be easier for you to get the loan you want. However do not be completely crestfallen if your score is not really that great. There are ways in which you can improve your score. For instance, if you use your credit card often and keep paying back the amount in time you can be sure that in time, your score will improve.
Getting the Loan for Your Car
If you are worried about the credit score for car loan, then here is some good news for you. You should know that it is comparatively easier for you to get an automobile loan, as compared to a home mortgage for instance. There are just two reasons for this. Firstly, the amount you take on loan will be much lower for the automobile, and secondly, the repayment period will also be less. Since the repayment period is less, it means that the risk for the lender will also be lower. The risk is of course less for a lower amount too. Because of this, the lenders are willing to settle for a lower credit score for car loan.
There is no ideal score for the auto loan. The right approach will thus be to keep it as high as possible. That way, you do not have to worry about the credit score for car loan.