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Checking Your Credit Before Shopping for Auto Loans |
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When you have your eye on a new car, there are many things to think about before you go shopping for auto loans. One of the most important aspects to consider, before you move forward with planning your purchase, is to see how lenders will view you. To get this perspective, you will need to check your credit reports and, most importantly, your FICO scores before you apply for any auto loans. Checking your credit is a very important part of getting an new vehicle, because you cannot receive an auto loan without acceptable credit. Luckily, your credit does not have to be all that outstanding in order to get a loan but, if you have ever had a repo or any other serious delinquencies on a previous auto loan, it may be near impossible unless you have had gleaming credit since then. It is always good to try and determine what kind of interest rate you will be quoted when you shop for auto loans. You can do this by buying all three of your FICO scores (there will be three separate ones for Experian, Equifax, and TransUnion) and finding out where they all stand. Although these will not be the exact numbers that a lender will use to determine if you qualify for an auto loan and what your interest rate will be, you can still get a pretty good idea of what interest rate category you may fall into. Each credit bureau does offer their own scores, but these scores will do nothing for you. You need to get your scores directly from MyFICO, as an 'auto-enhanced' version (which weights installment loans more heavily than it does it the 'classic' model, but performance on revolving accounts is still the core of your score) of these scores are what many lenders will use to determine if you qualify for an auto loan. Once you know your current FICO scores, you can check these numbers against online auto loan calculators to see what kind of interest rate you can get or if you will even qualify at all. If you are far from qualifying for a loan with these numbers, then chances are slim to none that you will qualify with the 'auto-enhanced' version that the dealer pulls. Additionally -- even though you need to check all three of your FICO scores before applying -- you may want to look at your Equifax FICO closely, since many popular auto lenders use their BEACON auto-enhanced score to rate applicants. Once you know how auto loan dealers will view you, you will then have a better idea of if you should try to haggle for a better interest rate, take whatever auto loan you can get, or stave off your purchase for 6-12 months so that you have an opportunity to get your credit scores up to par before you apply for any a loan. Remember, the better you scores are when you apply for a loan, the less you will pay for the privilege of borrowing the money. |
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