Your Credit Scores and Getting an Auto Loan

You need a new vehicle, if not brand new, at least new to you and acceptable for your transportation needs. You may spend hours going from dealer to dealer, looking at all the different makes and models, all the different colors and options available, and ultimately haggling with a dealer and agreeing on a price that is suitable to you both. Then, the dealer asks how you are going to pay for the vehicle.Car Buyer BewareUsually, a buyer cannot just pull out a check book and plop down the payment. The dealer likes this. He knows he is going to make a lot more money now since he will be arranging the financing. You can be sure you are going to get a loan with a high interest rate because you do not have any idea of what your credit scores look like and what kind of a loan your scores entitle you to.Know Your Credit ScoresBefore you even step onto a car lot, new or used, you need to check your credit reports. You can go online and find a website where you can have access to your credit reports. A law exists guaranteeing you free credit reports from the three credit reporting agencies once every 12 months. You will be looking for results from Transunion, Experian, and Equifax. These scores can range from 300 to 850. The higher the number the better.Scores from 700 to 850If your three credit scores are in the 700 to 850 range, you have what is regarded as very good credit and you can call up most traditional lenders, banks or credit unions, and get nice loan with a single digit interest rate of around 3% to 4%. This also means that your monthly payments will be rather low.Scores from 600 to 699If your scores are in the 600 to 699 range, you have average credit and you will probably qualify for a single-digit interest rate and monthly payments that you can live with.Scores from 500 to 599If your scores are in the 500 to 599 range, you have a poor credit rating and you will probably only be able to get a double-digit interest rate which can add a couple thousand dollars in finance charges over the life of the loan.Below 499If your scores range from 300 to 499, you have very poor credit and financing is going to be rather difficult. You may find a used car dealer who offers a buy-here-pay-here financing deal. They often advertise something to the effect that no credit is no problem and bankruptcies are welcome. Do not be surprised at the sky-rocket double digit interest rates they exact. Rather than get into a such a deal, it would behoove you just to save up enough money to pay cash for a vehicle.Be a Smart Loan Shopper and a Smart Car BuyerNo matter what your credit score, the ideal situation would be to have your financing all lined up before you even set foot on a car lot, new or used. You should at least know your credit scores and the kind of loans those scores will be able to get for you. Understand that dealer financing is usually not going to be the best deal and will cost you a significant amount of money in the long run. Shopping around for lenders online is probably going to land you the best deal.