What Do Auto Lenders Consider Bad Credit?

When people talk about getting a car loan, you can hear them talking about subprime lenders, captive lenders, or direct lenders. These types of auto lenders all cater to different borrowers. Perhaps the biggest difference between them is that some of them work with bad credit borrowers while others don’t. So just what is considered bad credit when you need a car loan access and which lender should you go for?

Credit scores for auto loans

Your credit score is a three-digit number between 300 and 850. It is important when you need credit in life, such as buying a car, getting a mortgage, and getting started. of a credit card. No one is born with good credit – you have to earn it. This journey usually begins at age 18, when a person can enter into legal contracts on their own. When you first start out, your credit score is usually somewhere between the low and the middle of the spectrum.

Each payment on time for various accounts – utility bills, loans, medical debts, etc. – all help build your credit score. On the other hand, missed payments, delinquent loans, and general financial mismanagement can lead to hardship that can lower your credit rating. Generally, the better your credit score is the best you are in life when it comes to borrowing for life’s major purchases – like a vehicle.

Often times bad credit is considered a FICO credit score of around 660 or less. While there are many different credit scoring models, the most common model used by auto lenders is the FICO credit scoring model. Lenders have different thresholds for the credit score ranges they can work with. Rating ranges can vary, but credit scores are generally organized into five levels: super prime, prime, nonprime, subprime, and deep subprime.

Let’s describe the credit score levels and see which auto lenders might consider you based on your credit score.

Good credit scores and auto loans

Good borrowers generally have a better chance of getting new credit, such as car loans. Lenders prefer borrowers with a solid payment history and good credit management. Build a good credit score can be time consuming, but it can save you money when you need new credit, so the hard work is worth it.

Super Prime: 751 to 850

When you hear the phrase “excellent credit,” think of someone with super prime credit score. When it comes to auto loans, the better your credit rating, the more options you tend to have. Senior borrowers often get the lowest interest rate, the best loan terms, and the highest loan amounts. These borrowers can easily buy a car loan almost anywhere, as long as they have the money to do so and can meet the other requirements of the lenders.

Premium: 661 to 750

First-rate credit scores are generally considered good credit. Borrowers in this group may not have as many options as blue-chip borrowers, but they likely won’t get turned away from most places. Loan opportunities are a fairly open playing field when your credit score is in this range. Again, the higher the better. When you need a car loan and have good credit, there is a good chance that you are eligible for a direct loan, which means you can get pre-approved for a loan from a car loan company. bank, credit union or online lender, usually without difficulty. You are also likely to be eligible for car loan approval from a captive lender through a franchise dealership, and you are probably in a good position to lease.

Auto loans for bad credit borrowers

The three levels in this section are what auto lenders generally consider bad credit. The first, nonprime, occupies the gray area between good and bad credit. A lower than nonprime credit score can lead to credit difficulties, and you may need to take some legwork to find vehicle financing. We’ll take a look:

Nonprime: 601 to 660

Borrowers who fall into this group are typically at the lower end of the qualifying spectrum when it comes to working with direct or captive lenders, and at the top of the class when it comes to working with risk lenders. It can be an interesting position. You will likely have plenty of auto loan options, but you may not qualify for the best interest rate or loan term from all lenders. On the other hand, if you have all your ducks in a row and don’t mind paying a little extra in interest charges, you can easily qualify for a car loan from a subprime lender (more about that in a moment).

Subprime: 501 to 600

Subprime borrowers are generally considered bad credit borrowers, typically with a credit score of around 600 or less. While finding vehicle finance can be difficult, there are some subprime lenders who specialize in working with borrowers in this rating range. They look at factors other than your credit rating to help you get the loan approval you need, such as your income and overall financial stability.

Deep Subprime: 300 to 500

With a credit score in the lower range, it can even be more difficult to work with most auto lenders. However, all hope is not lost, as there are many easy ways to strengthen your credit if it has fallen to this level. If your credit score is in this range because you are new to the world of credit, lenders can tell the difference between consumers with no credit and those with bad credit. There are still lenders who can work with you to get an auto loan if you know where to look. You may need to turn to a buy here pay here dealer or get rent to own a car to get wheels fast. Once you start to build your credit score, you can then move on to a subprime auto loan which can further improve your credit.

Determine your credit rating

Knowing where your credit is and what’s on your credit reports is a great first step in getting a car loan. You need to know your credit rating to be well informed, to research your credit, and to get a head start in auto loan negotiations. If you don’t know what the lender sees when they pull your credit, you’re leaving yourself in the dark.

Imagine if you’ve visited an unscrupulous dealership and the dealership realizes you don’t know what’s on your credit report. They could potentially tell you that a high interest rate is the best they can do. While your credit score may actually qualify you for a lower rate, you can’t negotiate or keep the ball in your court because you don’t know what your score is or what the average interest rate is for people in the court. similar situations.

To avoid potential dangers like the situation imagined above, make sure you know your credit score and what is on your credit reports. The information in your credit reports is what helps determine your credit score. So the more positive accounts you have, the better.

The easiest way to get your credit reports from the three national credit bureaus – TransUnion, Experian, and Equifax – is to visit www.annualcreditreport.com. This government website normally allows you to receive a free copy of your credit report from each company every 12 months. However, due to the recent coronavirus pandemic, the site allows you to receive your reports once a month for free until April 2021.

Some credit bureaus, such as Experian, have free offers and services when it comes to monitoring your credit reports and scores during times of economic crisis. Or you can sign up for an unlimited number of credit monitoring services to stay on top of your score and reports.

Find the right dealership for your credit

When it comes to finding auto credit with poor credit, you want the path of least resistance, and we want to point you in the right direction. AT Express auto loan, we match consumers with credit problems with dealerships who have been registered with subprime lenders for more than two decades. Let us make your next car loan experience quick and easy without the hassle of finding a dealership.

By simply filling out our quick and free form auto loan application formYou can begin the process of connecting to a dealer who has signed the right type of lender for your credit. Do not hesitate any longer, get started now for your next car loan!

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About Nereida Nystrom

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