Unfortunately, there’s not one answer to the question of what your interest rate will be, because what you qualify for largely depends on your credit and the lender you’re working with. However, there are a number of ways to determine what your interest rate is likely to be close to. Let’s take a further look…
Knowing Where Your Credit Stands
Rather than starting your car buying journey by asking what your interest is going to be, why not start instead with “what does your credit look like?” When you know your credit, you can begin researching the lenders that best match your needs.
To start, get a copy of your reports and score by visiting www.annualcreditreport.com. Every 12 months, you’re entitled to a free copy of your credit report from each of the three major credit bureaus: TransUnion, Equifax, and Experian. You can get your credit score at the same time, though this may result in a fee.
Now that you know what your credit score is and what’s on your credit reports, you need to know what to do with this information.
What Does Your Credit Score Range Mean?
Credit scores fall into ranges that are grouped by tiers. This is one tool a lender uses to determine risk. The higher the credit score, the lower the risk. There’s more than one credit scoring model available, but the one that’s used most commonly by lenders is the FICO credit scoring model.
FICO scores range between 300 and 850, with credit scores falling into the following tiers:
- 300 to 579 – Poor. If your credit score falls into this range you’re considered to be a deep subprime consumer, and you may have difficulty obtaining credit from a traditional lender. Borrowers who fall into this category tend to see the highest interest rates, sometimes even reaching 20% or higher.
- 580 to 669 – Fair. Credit scores in this range are below the national average, and considered subprime. You’re likely to hit some lending speed bumps, but you should be able to find a loan through non-traditional means, such as a subprime lender. Subprime borrowers typically qualify for lending at higher than average interest rates.
- 670 to 739 – Good. If you’re in this credit score range you’re considered a non-prime consumer. You may or may not qualify for lending from a traditional lender, and are likely to see higher interest rates than consumers with better credit scores.
- 740 to 799 – Very Good. Credit scores falling into this range are considered low risk for lenders. These consumers are known as prime borrowers, which earn them better than average interest rates when applying for credit.
- 800 to 850 – Exceptional. These scores are the cream of the crop and considered the lowest risk borrowers. This credit tier is called super prime, and borrowers in this range qualify for the best interest rates and financing deals.
Using this information, you can research the average interest rates for people in your credit scoring range online. At this point, it’s also a good idea to begin researching which vehicles best meet your driving needs, and begin setting up a car budget.
If you need assistance with boosting your credit score, we can help you with that as well.
Auto Financing Is Impacted By More Than Interest Rates
Even though your interest rate is a big factor in determining how much an auto loan is going to cost you, remember that it’s only one item that contributes to the overall cost.
Things like the year, make, and model of vehicle, loan term, down payment, and whether you’re buying new or used all impact a car loan – not to mention the cost of vehicle ownership itself, such as auto insurance, fuel, and maintenance.
Cars aren’t cheap, so make sure you know what you’re getting into before you apply for an auto loan.
Finding a Dealer for Your Needs
No matter where your credit score lands you, there’s usually a dealer available that can help. Sometimes, it just takes some searching to find the right lender for your needs.
Here at Auto Credit Express, we work with a nationwide network of special finance dealerships that have the lending resources available for people in many types of credit situations, including low credit, no credit, and bankruptcy.
To get connected to a local dealer that can help your car buying situation, simply fill out our fast and free auto loan request form to get started now.