Costs and expenses are always on the rise. However, basic needs are still important. And one of them is owning a car, especially if you live in a big city and work. It allows you to have independence and move easily around the city.
On the other hand, it is not easy to own a car. First, you must have enough financial resources to own a good car and then spend regularly on its maintenance. Many people so are seeking to own a car do so by taking out a loan. Car loans are available through private lenders like banks and direct online lenders.
Understanding Your Credit Score
When you seek a car loan, you will have to meet certain criteria to qualify. One of the most important criteria is the credit score. This is a grading on your credit report that shows your ability and responsibility to pay back. A good credit score lowers the lender’s risk.
A credit score of 780 or more is considered to be excellent. Below that we have a credit score of 680 and more and that is considered as good. 640 and more is known as fair credit and blow that limit is bad credit. Some people have no record of bill payments, credit card payments or debt so it means they have no credit.
The following factors go into calculating the credit score:
- Payment history – 35%
- Amounts owed – 30%
- Length of credit history – 15%
- New credit – 10%
- Types of credit in use – 10%
These are some of the major factors that go into calculating the credit score but some lenders may have additional factors as well. Similarly, some lenders may have a different limit of credit score required for certain loans than the others.
Credit Score Required for Car Loans
Typically, a car loan lender will consider a good credit score, which is 640 and more. Of course, it could vary as to what range is considered good by a certain lender as mentioned above. If you have fair credit, it is possible that the lender may consider some other criteria to consider your eligibility. Bad credit and no credit owners may have to either build their credit or look for alternate options.
Finding Car Loan Lenders
If you an excellent or good credit, you can simply go to banks and consider their various car loan packages. On the other hand, if you are looking for less strict rules and regulations and quicker approval processes, then you may consider an online lender. These direct lenders have become fairly popular in the past few years because of the convenience they offer.
Financing a new car could become easier with a car loan. And taking out a car loan is easier for good credit owners. In case you are struggling with the credit score, you may consider talking to a financial expert on how to boost it. There are certain quick methods to improve the score.