ONLY at Keith Pierson Toyota as low as 0% 36 months on Camry, Corolla and RAV4.
It’s possible to buy a car even if you have bad credit. However, it’s important to understand how your credit score can impact your financing options. Credit agencies use an algorithm that considers your debt, income, available credit, and payment history to calculate your credit score. Higher scores indicate a lower risk to lenders, while lower scores indicate a higher risk.
So a low credit score won’t prevent you from securing a loan. However, banks may impose higher interest rates and offer smaller loan amounts due to the increased risk. Even with the credit scores and common practices associated with issuing loans, no standard exists that the industry must follow. This means that each lender has its own policies, which may result in approval by one lender and denial by another.
Credit Scores Explained
Lenders rely on the three major credit bureaus, Experian, Equifax, and Trans Union, to obtain your credit score, which indicates your creditworthiness. Scores range between 300 to 850 points, and each agency will have a different score for you based on the information they access and their algorithm.
However, auto lenders typically use the FICO Auto Score to determine the creditworthiness of borrowers. It ranges from 250 to 900 points and puts more emphasis on responsible debt management, considering factors such as payment history, available credit, and debt-to-income ratios.
As a result, a higher FICO score will produce a lower interest rate on a higher loan amount and vice versa. Suppose you fall within the 20% of consumers with a top-tier FICO score of 800 to 900 points. In that case, you can expect fast approval on a loan with an interest rate of 0% to 3%.
Twenty-five percent of buyers have FICO scores between 740 and 799 points. This range is still a very good score. So you can expect loan approval with a 3% to 6% interest rate if you fall in this category.
Scores between 670 and 739 points fall into a middle category where lenders vary slightly more on approvals and interest rates. If approved, you likely will have an interest rate between 5% and 8%. For scores ranging from 580 to 669 points, lenders are more selective about approval, and the interest rates can be between 7% and 12%.
Any score falling below 580 presents the highest risk to lenders. Securing an auto loan with a score below 580 is still possible. However, interest rates start at 13% and can go much higher than that, depending on the circumstances.
How To Raise Your Credit Score
The credit bureaus’ algorithms measure many factors, and scores usually take time to move. However, you can do a few things that can have an immediate and significant impact on your score.
First, you need a copy of your credit report to see what’s on it. Many people review their credit reports and find credit history that belongs to someone else. And it’s almost always negative. Getting these removed from your report can change your score dramatically.
If there are any late payments on your credit report, you can contact the lenders who reported them and ask for their removal. Most lenders are willing to do this if you’ve been consistent with your payments since the late ones occurred. Of course, they don’t have to, but they never will if you don’t ask.
Credit utilization is another factor in your credit score. Unfortunately, most people have yet to learn what this means and how it works. Simply put, your credit utilization is how much you owe on credit cards compared to how much credit you have left to borrow against.
For instance, if you have a credit card with a $1,000 limit and owe $500, your credit utilization is 50%. However, most lenders want to see your credit utilization under 30%. So in this example, if you paid $250 on this account, your rate drops to 25%, and you’re now in the range lenders like to see.
You can also use Experian Boost to increase your credit score. Experian Boost allows you to apply on-time rent and utility bills such as gas, electricity, and telephone to improve your credit score.
Keith Pierson Toyota Finance Department
At our Keith Pierson Toyota dealership, we believe everyone has the right to own a vehicle, regardless of their credit. Our finance managers have decades of experience finding loans for buyers in all credit categories. To help you get started, we encourage you to complete our online pre-approval application. You’ll receive an answer in minutes, including your loan amount, interest rate, monthly payment, and terms.
We know some people prefer a face-to-face meeting to discuss their financing options. Feel free to visit us at 6501 Youngerman Circle if this sounds like you. One of our finance managers will answer your questions and help you through the process.
We also have a convenient online vehicle valuation tool to get an accurate price for your current vehicle as part of a trade-in. It’s quick and easy. You input the relevant information about your car’s make, model, mileage, and condition, and in seconds, you’ll get a fair offer. We’ll purchase your car whether or not you buy another vehicle from us.
If you’re curious about how a deal might look, we have an online calculator that lets you estimate your costs based on variable loan amounts, trade-in values, down payments, interest rates, and terms. With this information, you can shop confidently, knowing what you can afford.
Explore Your Car-Buying Options Today in Jacksonville
A less-than-perfect credit score shouldn’t deny you the privilege of vehicle ownership. That’s why our finance department provides expert advice and transparent pricing models so you can make an informed buying decision, regardless of credit history. We invite you to shop our virtual inventory to see what you like and speak with one of our loan specialists to explore your financing options.
Image by Avery Evans is licensed with Unsplash License
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