When you go out in search of the motorcycle loan, one of the things that will be given serious consideration is your credit report and your current credit score. Your credit score shows how you have managed your credit in the past and whether you have a financial capability to pay back the loan or credit that is given to you by the bank or any other lending institution.
The minimum requirements for the motorcycle loan will differ from one lender to another. Every lender will follow their set of rules and minimum requirements. However, for the reference point, you should have a minimum credit score of 620. If you have a credit score that is below 620, the chances are that your loan request will be rejected by the lending institution. In this condition, you must look for ways to improve your credit score before the next inquiry.
You may also look for a subprime lender. They are not very easy to find in the given market conditions. However, if you find one, they would be willing to lend you even at a credit score below 620 but in return, you will be asked to pay higher interest rates on the loan amount.
Credit score needed to finance a motorcycle
The credit score is the measure of your creditworthiness. It takes into consideration components such as your credit payment, the total number of loan inquiries, etc. Your credit score is calculated by the credit bureaus or the lending institutions. You credit score shows how you have managed your credit and loan obligations in the past and whether you will be able to meet your payments in the future or not.
Just like any other loan or credit for items or products, you can get financing for the motorcycles. It depends on the kind of bicycle you are willing to buy for yourself. Moreover, the minimum credit score required for a motorcycle also varies depending upon the different dealers and the overall value of the motorcycle.
However, you should keep in mind the minimum score that you need to finance the motorcycle. A credit score that is over 620 marks should be good enough to get the loan for motorcycle from the major dealers operating in your area. If you move to lower class of motorcycle, your minimum credit score may go down as well. It is important for you to calculate your ability to pay the loan apart from your credit score.
What is a credit score
A credit score is needed for you to be able to get a loan or credit. The reason behind this is because it will help financial institutions to determine your creditworthiness. They will also see every loan that you made and the payment history that you have. Find out more about it by reading the information below.
Credit scores are calculated based on the proprietary algorithm. This will include the person's outstanding debts, payment history, and the length of the individual's credit history.
Credit scores can range from 300 to 850. The higher the individual's score, the lower the risk. People who have lower credit scores are considered high risk, which will make lending companies ask for more requirements.
About Fico scores
Fair Isaac Corporation is the one who established FICO, and it is one of the most commonly used credit scoring systems today.
According to FICO, 90% of the most reputable and respected lenders today are making decisions according to this kind of credit scoring system. Get to know more about Fico scores by reading the information below.
How are credit scores calculated?
The weight of each of the five categories are; 30% of amount owned, 10% is for the new credit, 15% accounts for the length of credit history, 10% is the credit mix and the last 35% accounts for the person's payment history.
The FICO score takes into consideration positive as well as negative aspects of the credit report. The percentage or the weight of any of the categories mentioned above may differ from a person to another depending upon the information available in the credit report.
The FICO score takes all of the information from your credit report. However, the banks or any other lending institution might look at your income, type of credit and employment history when you apply for a loan or mortgage.
Once a certain lender asks for a client's credit report, they can also ask for the Fico score. Other sources say that your Fico score will include 35% of your payment history, 30% of your credit utilization, and 15% as to how long have you been borrowing.
Explanation of credit score ranges
It is important to know the category that you fall into when it comes to credit score for you to be aware. The range of a credit score can go from 300 to 850. Always remember that the higher your score, the higher the chances of you to qualify for a loan. There will also be instances where a financing company is okay with 650 scores, while the other is fine with a 750 score. It will all depend on the lender itself.
A lender or a bank will check your credit score if you qualify for the application that you are requesting. Here are some of the credit score ranges that you should know.
Bad credit score
People with a credit score below 579 is known as high risks. Foreclosures, poor payment history, and bankruptcies are the reasons why people fall into this category.
Good credit score
A good credit score ranges from 680 to 719. People with this credit score can expect approvals and interest rates that are better.
A very good credit score ranges from 720 to 799. People with this credit score is known to be small risks, and they often get loan amounts that are higher than usual.
An excellent score ranges from 800 and above. Financial freedom is expected to people with this score.
Things you can do to improve your credit score
Having a bad credit score is similar to having poor health. Therefore, you need to take measures that ensure you are continually improving on it. The most efficient way of repairing bad credit is good management over time. Improving your credit score is necessary for you to be eligible for better terms and rates for loans in the future.
Regular credit report checks
You are advised to monitor your credit report regularly to see if it has any errors. A credit report brings you up to speed on your status as a debtor. Ensure that the payments are reported correctly and the amount owed to each creditor is correct. Errors must be disputed to your credit bureau promptly.
Reduce your debt
Most people usually take loans just because they are eligible for them without considering the potential damage to their credit score. For a start, you can reduce your reliance on credit cards. Design a plan that ensures you give priority to your debts that have the highest interest rates.
If your monthly premium is not automatically debited from your account, you need to set up a payment reminder. Timely credit repayment improves your credit score over time. Some financiers usually send emails or texts to their clients to make payments.