Sunday, 20 October 2019

What Credit Score Do You Need To Buy A Car?

Car loan

I have seen people ask a series of questions which I have decided to write an article about it, to help you understand the car buying process and this whole one of the popular question people is what credit score do I need to be able to qualify for a car.

That is a great question, so we are going to talk a little bit about credit today and how banks make decisions on giving out loans.


Let Talk About Credit.

Credit is really important if you want to buy a car without using your money, and so obviously if you are not using your money, you are using the bank's money not some random investors' money but rather in financial institutions. 


What Credit Score Do Banks Look For?

Most banks will look at credit scores that are above 550 if you have less than a 550 they will typically won't consider financing you. Keep in mind that a 550 credit score will earn you a higher rate because that is a very bad credit score.

Most banks like to see a 682 to780 credit score, but in the most parts, I think if they see over 720, you are going to get what you call "tier 1 or tier a", credit rates, meaning, some of the best rates in the industry, etc.


What Rate Should You Be Expecting

Rates are subjective to your area, rates are subjective to time so I am not going to go into what rate you should be expecting because obviously, that is going to change over time, 


Bank Look At This 4 Things When It Comes To Credit

  • How Many Cars Have You Financed Before?
  • How Long Have You Kept Them?
  • How Well Did You Pay Them?
  • What Were The Amounts On The Car?

However, what you should know is this. When it comes to credit, banks look at a few things when making a decision to lend you money or not, they look at your history of a car finance, not just if you were late or not, those things play a role in your score.

But what banks look at is specifically, how many cars have you financed before, how long have you kept them, how well did you pay them and what were the amounts on the cars.

They like to see that you are buying cars in the same range that you typically buy cars in, a little bit more is okay, but typically someone who's only financed $30,000 cars, cannot finance a to be $400,000 car without some massive down payment.


You Are Allow To Lend $250,000 threshold

Most banks will have a threshold of $250,000 commercially to lend you, meaning anything above that will have to be used whether as cash from your pocket or you will have to get a different source income for that.


Your Income

Most banks will look at your income and most banks will consider your income stated unless you are self-employed. If you are self-employed, make sure that you write that you work for a company even if it's your own, this little trick enables you to bypass the employment verification process and enables you to get even further ahead in the way you can actually get the loan and how quickly you can move out the loan.


Look For Newer Cars, Banks Don't Like Old Car

The best things to look at is the dollar that you are actually getting into a car for, so if you are typically financing $30,000 cars, it might make sense to focus on a $60,000, $70,000, $80,000 car next, not rather 120k, 150k, car.

Look for newer cars as banks don't really like old cars, while, you can still find older cars being financed especially by credit unions and banks, you will need more down payment, typically you will need 20% to 25% down, including the taxes paid in order to actually finance a much older car.

Looking at newer cars may be more beneficial because you will put less money out-of-pocket and your payments won't be that different due to a more aggressive rate and due to more aggressive payment from being able to extend your loans up to 84 months in many cases.

Would you rather have a new RLP 56, or a year older, if they cost you the exact same amount, and the outcome can be the exact same when you sell them? So look at that in terms of financing


What Are Dealership

keep in mind that there are always ways to get around problems with financing and that is called the dealership. A dealership has a lot more leverage, a dealership has a deal with what you call wholesalers, that selling loans from the same banks you apply, on the back end. 

Those particular loans are more aggressive coming from the dealer because the wholesaler has the relationship, so he will approve more for the dealer than for a normal person, remember that when looking at credit, credit is more than just a credit score when it comes to buying or selling a car. 

It's about understanding how you are being judged and making sure that you present yourself in the best possible way so that the bank can give you the lowest loan in the faster way.



Keep that in mind and you will have a lot of success

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