You may be wondering what a good credit score for an auto loan is? The answer is: It very much depends.
As it’s truly possible in today’s lending market to be approved for an auto loan with just about any credit score, but the better your credit history, the bigger your chances of getting approved with favorable terms.
When it comes to calculating your credit score many auto lenders use varying credit scoring models. Depending on the credit lender, they may use one of the following:
Fico 8 or 9: Both models are the latest versions of Fico’s basic credit score, providing a general look at a consumer’s overall creditworthiness. Access to these scores may be possible through your existing credit card issuer or a credit monitoring service.
Fico Auto Scores: This model gives lenders more specific information on your likelihood of paying back an auto loan, it provides a credit scoring model that is specific to the auto industry. If your lender uses this model as part of your credit check all previous loan details are outlined so if you have had any past payment issues it may be more difficult to get approval through this model.
Vantage Score: VantageScore offers two credit scoring models to lenders which were created by three independent credit reporting agencies – Experian, Equifax, and Transunion. Both use information from your credit report to determine your creditworthiness.
Consumers, unfortunately, do not have any control over the credit score model lenders use upon evaluating your application.
However, finding out your base FICO credit score can help indicate your chances of approval.
The FICO Score is broken down into five tiers and ranges from 300 to 850:
Exceptional: 800- 850 credit score
Very good: 740- 799 credit score
Good: 670-739 credit score
Fair: 580-669 credit score
Poor: 300-579 credit score
As this break down suggests, with a good to exceptional credit score you have an excellent chance of being approved for all types of the best auto loans by most auto lenders.
For example, let’s say you have a very good credit score of 780 and are looking for a loan on a new car which costs $30,000.00, a company such as Lightstream can offer you APR of 3.99% on a 60-month auto loan. Such a loan will have monthly repayments of $478.71 and you would pay $2,722.60 in interest over the life of the loan.
However, don’t fret if your credit score is in the fair to poor spectrum there are several lenders who will still offer auto loans based on such situations.
For example, if you were looking to refinance an existing auto loan of $20,000 and had a fair credit score of 590, a company such as Capital One can offer you APR of 4.02% on a 36-month auto loan. In such a scenario, you will have monthly repayments of $472.00 and the total interest paid will be $1,011.08 over the lifetime of the loan.
There are also several lenders who also offer those with a poor credit score auto loans on new and used cars, leasing and refinancing; companies such as Lending Club, OpenRoad Lending and MyAutoLoan have minimum credit scores ranging from 500 to 525, while Carvana does not employ a minimum credit score on applications. All offer competitive APR rates ranging from 2.99% to a high of 24.99%.
For example, if you are purchasing a used car valued at $15,000.00 and have a poor credit score of 500, a company such as MyAutoLoan may offer you an auto loan with a $5.7% APR on a 48-month loan. In such circumstances, you will have monthly repayments of $256.83 and you would pay $1,327.84 total interest over the lifetime of the loan.
In determining your ability to repay debt your credit score is a very important factor. However, how it affects your auto loan varies on lenders and the credit scoring models they use upon evaluating your creditworthiness. Normally though, the higher your credit score, the more chances you have of a lower interest rate and less restrictive loan terms.