Credit Matters to Your Car Loans Why National Lenders Judge Credit

How Credit Affects Your Auto Financing

Harry Lloyd

What is credit?

Every lender has slightly different criteria that they judge when you are applying for a loan, but one factor that always plays a big role is your credit score. It is a tangible and measurable number that sums up your financial history and makes it easy for lenders to judge how risky of an investment you are.

You build credit by paying off your debts. This can be done by paying your credit card expenses or your monthly bills on time. One of the best ways to build credit is by paying off loans, like your financing for cars. The more debt you take on and pay off, the higher your credit score will climb.

It may sound weird that someone who has had debt their whole life could easily have a higher credit score than someone who has never been in debt. This is just the way it works however, since the person in debt has a track record of consistently paying, while the debtless person never had a chance.

Why does it matter?

When you want to go buy a new car, you will probably need to find a national lending company, like a bank or credit union, to lend you enough money to buy it. When they consider your application, they need to assess if you are a safe enough bet to invest in.

Better credit scores can make a tremendous difference in the rates, terms and conditions that you will qualify for, which in turn greatly affects how much money you will be paying in the long run.

If you have bad credit or no credit at all, you may have to find someone who does to cosign for you. Every lender is different, so make sure you shop around. You may also need to drop your expectations and shop for less expensive used cars.

There are several ways to build your credit, and even a little improvement can really help you with your loans. Credit cards offer a quick and easy way to start off. Whatever route you take to build credit, always make sure you pay your balance in full, on time, every month!

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