Many lenders will perform a hard inquiry on your FICO score before approving the car loan. Therefore, the first step to applying a car loan is to obtain a copy of your FICO score and check it for any error that may have entered accidentally on the credit report. Having a good FICO score can help you to get a car loan with a lower interest rate. Borrowers with FICO score above 781 can expect to get the lowest APR interest rate that can be as low. The average car loan interest rate for borrowers with an excellent credit score is 2.6% while those with good credit score will get charged with an APR interest rate around 3.59%.
If you want your car loan to have an interest rate below 5%, you should have a credit score in between 690 – 719. If your credit score is lower, the interest that you pay is going to be higher in the event that your car loan gets approved. You can find out the estimated interest rate that you will pay at different FICO score level from the chart at MyFICO.com. The length of the loan term also affects the interest rate that you are charged. To take advantage of low-interest rate, you should choose a short repayment term for example 3 years.
If your credit score is lower than average, you don’t need to worry about not being able to get a loan because you will still find lenders that are willing to approve your car loans. An online comparison tool is a useful tool for finding car loans that accept applicants with low credit score and have an affordable interest rate. If you want a loan with a better interest rate, you should take actions to improve your credit score for example pay bills on time, maintain a low balance and only apply for loans when you need it. If you consistently pay your bills on time, your credit score will surely increase within a few months.
When you are doing research online, you will see a lot of advertisements that ask you to go to their site to get a free credit score. These credit scores are not FICO score and should only be used as a guideline for understanding your credit behavior. There are several ways you can obtain a FICO score report and one way is to go to myFICO.com and purchase it. A credit score costs about $19.95 for each bureau and $59.85 for 3 bureaus. You can also get a FICO score credit report by signing up for credit monitoring services. Another way to obtain FICO score credit report is via credit card companies and banks.