Different auto companies welcome different consumers. For example, HONDA and Toyota financiers can welcome auto loan borrowers who have a credit that is within the 600 range. Other car financiers such as Ford and General Motors cannot take you if you have a credit score below 640.
Today, car buyers can get a loan if they have credit score rating that ranges between 500-600 points. Car loan reports are showing a large percentage of consumers buying cars with a less than average credit score. However, it's common to see borrowers with less than average credit score getting car loans with large interest rates.
Rate of interest you will pay
You can get a limited number of auto car brands with a credit score below 640. What you need to know is that when you have this credit score, you will be charged an interest rate of 13-18% and nothing below this interest-rate range. Therefore, with a credit score that ranges between 600, you do not have the luxury to choose the car you want regardless of its terms and conditions of the auto loan financing. You can only take a certain limited variety of affordable cars when you have a credit score that financiers do take seriously.
The lower the credit score, the higher the interest rate on car loans. Even though different financiers and different auto loan companies have different packages for different credit scores, the range is almost similar. The interest and the terms and conditions are also almost similar. Therefore, do not expect to get better treatment if you have a credit score that ranges within 600.
Getting the auto loan
If you have a credit score of 600 and you need an auto loan, the best you can do is to wait for a few months to better your credit above 650. A better credit score will give you undisputed auto loan interest, which is different from what you will get if you had a lower credit. For example, you are likely to get an auto loan with a credit score of 590, but with an interest rate of 18%. For the same car, you will get an interest rate of 13% if your score is 640.
Car financing options in Canada based on credit score
Getting a car loan in Canada will also depend on the credit standing that you currently have. For people who are just starting to build their score and for the ones who have a bad credit rating, you don't have to worry about anything because it is possible to get a car loan in Canada. All you have to do is to look for the right financing company to help them.
RBC Royal Bank
One of the banks in Canada that can give you the car loan that you need is RBC Royal Bank. They have rates that are competitive. Their amortization payment is affordable, wherein the period can last for up to 7 years. They also have payment options that are easy; wherein you can opt to pay monthly, semi-monthly, weekly, or even bi-weekly. If you plan to pay everything early, then you don't have to worry because they won't charge you extra for it.
TD Canada Trust
Another financing company that can help you get a car loan is TD Canada Trust. They usually have different interest options to choose from, variable or a fixed rate. The company will also offer you an amortization period that will work for you.
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.