Credit challenges won’t keep you from being approved for a car loan, but a lower score will affect the loan terms and interest rate. If you have a lower than average credit score, you’ll be charged more in interest. Don't despair though; even with credit difficulties, SVG's financing specialists can help you find the best option. Let's take a look at how your credit score will (in part) determine your loan terms.

First, there really is no "minimum" score you need to have to qualify for a vehicle loan. Generally speaking though, any person with a credit score of 700 or higher can pretty much choose whatever vehicle they want from the SVG inventory. Of course there are other factors a lending institution will consider, such as how much debt you have in comparison to what your income is. This is called your DTI, or debt-to-income ratio. If your debt is equal to your income (in other words, you live paycheck to paycheck, even with a high credit score), your chances of getting the best terms and rates is greatly reduced.

Before you begin shopping for a vehicle, it's always a good idea to see what your credit score is. Many people are unfortunately disappointed when they check their credit score for the first time, or if they haven't checked their score in many years. For example, young individuals who have never had a credit card or loan of any kind might assume that they have a good credit score because they've never been late on a payment. Quite the opposite is true though. If you've never used credit, lenders don't have any history on you to determine how reliable you'll be, therefore you won't even HAVE a credit score. This is why young borrowers will often need a co-signer. On the other side of this situation, older individuals who prefer to use cash for all of their transactions may not have much of a history either. No matter how reliable they may have been in paying their bills, since they paid with cash, there's no digital history for a lender to track. So first things first...exercise your right to get a free copy of your credit report so you know where you stand. You can even use a free service like Credit Karma to get a rough idea of how your credit stands. Please keep in mind that free credit services aren't always accurate and can vary from your true score by quite a bit.

Credit scores range from 300-850. Those with long histories of reliable, responsible borrowing will have higher scores. Those with little or no history or show habitual irresponsible use of credit will have low scores.

Scores from 300-500 represent someone who has either no history at all, a very limited history of credit use, or a very very poor history of reliably making payments on time. These people have chronically paid their bills late or not at all. Often they may have filed bankruptcy, experienced a default judgement or had property repossessed. Your chances of getting a loan in this score range is low with most dealerships, but not impossible. Because you represent a high risk to the lender, your loan terms will be far less favorable than someone who has a good established history of responsible credit use. Expect to pay the highest interest rates allowable if your score is in this range. As long as you have a verified, steady income of $1500 a month, the financing professionals at SVG can secure a loan for you, even with low scores.

Those who have many serious issues on their credit report but may have shown some times of responsible credit use have scores between 501-580. Sometimes, the credit issue is due to a temporary circumstance, such as becoming behind in bills due to a job loss (but then once a new job was found, the bills were brought up to date). Lenders will take this into consideration and see that you had a situational difficulty versus chronically irresponsible use of credit. In this range, the chance of being approved for a vehicle loan anywhere other than SVG is probable, but you should expect to pay high interest and will likely have to make some compromises on the vehicle you want.

Typically, a credit score of 581-640 has been earned by someone who has a very short credit history use but they've used their credit very responsibly. Since the amount of time the individual has been using credit doesn't show a long-term commitment to responsible borrowing, they'll still have to pay higher than average rates. Conversely, those who have credit scores in this range may have a long credit history but they've had a serious issue or two at some point in the past (or currently). Chances of getting a vehicle loan with scores in this range are very good, but keep in mind your terms and rates will not be the best available.

When your scores start reaching the range of 641-699, most lenders will give you a loan. You won't have the best rates available, but you won't be penalized harshly for your less-than-ideal score. When your score is in this range, it could be due to a high DTI. Even though you've shown responsible use of credit by paying on time, 100% of the time, if your credit use exceeds 30% of your available credit, you represent a risk to a lender because you could easily rack up more debt and render yourself unable to pay on a new loan.

Those who've paid their bills on time consistently and have kept their credit use at 30% of available limits will have scores of 700 and up. Different lenders have their own ideas of what is an ideal borrower. Some lenders will see a 730 and up as qualifying for the best deals, while some lenders may require a 750 for the best rates. On average though, most lenders will consider a 700+ as their ideal candidate and they will qualify for the best interest rates possible.

In summary, as you can see, there is no minimum credit score required to obtain a loan for a vehicle. If you'd like to get pre-qualified for a vehicle loan, you are always welcome to use the financing tool on our website. Our professional specialists will work with you to find the best vehicle AND financing options to suit your needs and individual situation. You have nothing to fear; SVG will do whatever we can to help you get that new vehicle that you deserve.

Subscribe to Our Blog

Popular Tags