Most people know that having a good credit score is essential for securing a loan to fund a vehicle or home purchase. However, too many consumers don’t fully understand what distinguishes a bad credit risk or how to qualify for the lowest possible interest rates. Before you head to the used car dealership to purchase a quality used car, know what financing options to expect given your credit score.

A Brief Guide to Credit

Good vs. Bad Credit

Credit scoring is based on a range from 300 to 850, with higher numbers being more desirable. Any score under 600 is considered bad credit. As your score increases, your rating, which is an assessment of your ability to pay back lenders on time, moves up from bad to poor, fair, or good. Any score over 750 is deemed excellent.

Many factors determine where you end up on the scale, and your score is continually changing to reflect your latest financial transactions and payment history. If you pay all your bills on time and in full every month, you’ll improve your score.

Your credit utilization rate, or how much of your available credit you regularly use, also impacts the score. Consistently use less than 30% of your available credit for the best score. Your credit history is also crucial. If you’ve demonstrated that you’re a good credit risk by paying off other loans, such as those for a used car or credit card purchases, your credit score should be high.

How Your Credit Score Affects a Car Purchase

The number you’re assigned tells lenders how much risk they take in when granting you a loan. A used car dealership, for example, will look up your credit report before offering you a loan.

A poor or bad score may cause a lender to refuse your loan application. Those with fair credit may secure a loan, but their interest rate will be higher because the lender is taking on some risk that you’ll default on your payments. As your score gets higher, your offered interest rate will get lower.

Express Motors, a used car dealership in Dayton, OH, makes buying a used vehicle affordable. They have a wide selection of high-quality preowned cars, SUVs, and trucks for sale at competitive prices. Every car is thoroughly inspected before it’s put up for sale, and they offer attractive financing terms. Go online to calculate the trade-in value of your current vehicle, and call (937) 222-7777 with any questions.