HOW CAN A CAR LOAN HELP RAISE MY CREDIT SCORE?
Auto loans are a great way for customers with bad credit to get back on track to having stellar credit. Having a car loan is great because they come with a fixed interest rate that’s set over a set number of months ranging from 36, 48, 60 and 72 months with the same payment for the entire duration, making it easier to plan out your monthly budget based on upcoming car payments.
It’ll take time to raise your credit score, but making regular payments will elevate your score over time and allow for access to secure an even better loan in the future. Credit scores look at your reported credit history to gauge whether or not you’re likely to repay borrowed money, so even if you’re in debt you can still have a great credit score if you’re paying your bills on time.
The hardest part is deciding on the duration of the loan that fits in your allocated budget, which is why our team of financial experts are trained to get you into your car of choice at a rate that won’t break the bank.
WHAT IS A LOW CREDIT SCORE
According to Experian, one of the three major credit bureaus, credit scores can be divided into five categories:
- Super Prime: score range of 781-850
- Prime: score range of 661-780
- Nonprime: score range of 601-660
- Subprime: score range of 501-600
- Deep subprime: score range of 300-500
Rates can fluctuate depending on your credit score, but our finance team at Joseph Toyota of Cincinnati works to get you the best rate possible no matter what your credit score looks like.
CREDIT SCORE BREAKDOWN FACTORS
Are you wondering what factors go into a credit score? There are five different elements that go into a FICO score:
Payment history is the most important factor that goes into calculating credit scores and comprises 35 percent of your total credit score. Past long-term behavior is factored in when forecasting future long-term behavior, with payment history often taking the form of credit cards, mortgages ad student loans.
Credit utilization is the percentage of available credit that a person consistently borrows, making up 30 percent of your overall credit score.
Length of Credit History
The length of someone’s credit history accounts for 15 percent of their overall credit score; a longer credit history provides more information and a better picture of long-term borrowing behavior.
New credit makes up 10 percent of a person’s credit score; the more new credit that you have, the lower your average credit age will be, which will affect your FICO score in the long-term.
By having a good credit mix, a customer is able to show lenders that they can handle all kinds of debt. This mix accounts for 10 percent of a person’s credit score.
WHAT DOCUMENTS DO I NEED FOR AN AUTO LOAN?
After filling out our auto loan pre-qualification finance form, be sure to give us a call at (513) 741-5860 so we can set up an appointment in the dealership and get you started on applying for an auto loan.
Having the right documents can speed up the process to getting your loan approved quickly. Below is our checklist of what most lenders are looking for when approving car loans:
Proof of income: be sure to bring copies of your pay stubs from the last month alongside the total of what you’ve been paid year-to-date.
Credit and banking history: lenders look for other loans or financial obligations you have outstanding as well as how you’ve handled debt payments in the past. In order to pull your credit history, a lender will need your name, address, date of birth and social security number.
Proof of residence: you can use your mortgage statement to verify your home address or any piece of personalized mail you’ve received in the past month.
Vehicle information: once you’ve picked out the vehicle you’re looking to purchase, having the VIN, year, make and model on hand can help speed up the process when you visit the dealership.
Proof of insurance: you need to provide proof that the insurance company knows about your newly purchased vehicle and that the car is adequately insured.
Proof of identity: in most circumstances you’ll be required to present a government-issued I.D. showing your photography and residence, most commonly a driver’s license or passport.
Current vehicle registration (for trade-in): if you’re trading in your vehicle, you’ll want to bring your title and registration to speed up the transaction. A certificate of title will prove that you’re the owner of the vehicle alongside listing any lien holders.