Tips To Get Car Finance With Fair Credit
So, you need to purchase your dream car, but with average credit, typically between 630-689, you certainly fear that you will not get a good interest rate. Also, there is the fear that the dealer might give you a rate that’s above what you really deserve. Learn more about this with the Car Finance Blog.
Well, fear not, as with these steps, you will not only get an ideal rate but ideally be in a stronger position when you head out for car shopping.
First Things First…
Before you head to the car dealership, ensure that you have thought through your financing requirements. At least answer the following:
- How much can you afford to spend on a vehicle?
- Should you purchase a new or a used vehicle?
- How much are you willing to give as down payment?
- What monthly payment will fit into your budget?
Examine Your Credit
The next and one of the most important tasks is to review your credit report for any mistakes. You can get your report from any of the three credit reference agencies for free, which are Equifax, Callcredit and Experian. Each of them holds a file on you, but bear in mind that the information might differ slightly.
If there are mistakes on your credit report, dispute the errors with the CRAs and once the correction is done, you should be able to see an improvement in your credit score. This will help in getting a significantly lower interest rate on your car loan.
Get Pre-approved for a Car Loan
Before you visit the dealership, apply for a pre-approved car loan. This will help you know what interest rate you’ll qualify for, thus simplifying the car buying process.
Design Your Deal
Here you can avail a car loan calculator to compare offers and see what payment will best fit your budget. If you are not certain about qualifying for car financing, then plan on making a bigger down payment.
It is advisable to pay off car loans as soon as possible because as the vehicle ages, you might find yourself paying for repairs and even owing more money than the car is worth. According to experts, you should set the term for a new car loan to 60 months and 36 months for a used one.
Know what the Dealer is After
Dealers will simply take a look at your auto-specific credit score. Factors that influence this score are payment history on previous car loans, settled or declared bankruptcy on auto loans and whether you have ever had a car repossessed.
The next element that lenders and dealers check is your financial stability. If you have a fair credit score, you need ideal income stability to make up for it.
Attempt To Increase your Credit Score State from Fair to Good
If it’s possible to wait to purchase a car until after you increase your credit from average to good, then do so. With a higher credit score, you will be able to get better car financing options and lower rates for auto insurance. After disputing any credit score lowering mistakes, there are a few other things you can do to elevate your credit. Lower the limit of your credit cards and focus on paying your bills on time. Eventually, you will have a good credit score.