What Is Your Credit Score
One smart thing to do before you begin the car loan process is to check your own credit score. Be sure you’re looking at a FICO® Score, as that’s what the lender you apply to are most likely to use.
Many credit card issuers give customers a free FICO® Score as a perk of membership, but it can be a smart idea to pay for a score-monitoring service. I use myFICO.com, as it’s run by the creators of the FICO® Score. Not only does this get you access to FICO® Scores from all three major credit bureaus, but there are many other useful tools as well .
Why A Lease Can Improve Your Credit
When you lease a vehicle, you are putting yourself in a strong position to improve your credit score. That’s because you are opening a new source of credit and expanding your credit history. However, it may take some time before you start to notice these benefits. As a result, you have to be patient and regularly make your payments on time.
In fact, lease payments are considered the same thing as a loan payment by credit scoring companies. They are impressed whenever a person either leases or buys a car and will improve a person’s credit score accordingly. However, they won’t improve your credit immediately. In fact, the most critical element of this improvement is making your car payments on time during the length of your lending term. Failure to make one or more payments in a timely way could negatively impact your score and offset the benefits.
Beyond that, your improvement will also be affected by the amount that you owe on the vehicle. At first, your 650 credit score may take a temporary and slight hit when you take out a lease. That’s because you are taking on a significant amount of credit in a quick fashion. However, timely payments will help to offset this damage and quickly improve your credit. It will not only advance past the initial damage but can even grow to higher levels, such as the 700 range.
What Does A 520 Credit Score Mean
A credit score of 520 comes within the range of 300-550 and is considered to be a bad credit score. If your credit score is within this range, you will need to take serious steps to improve it. A low credit score will not make you eligible for a loan or credit card. Any score of 750 or higher is considered ideal and eligible for various credit cards and loans. If your credit score is less than 750, it will be difficult for you to obtain loans from NBFC and banks. If the loan is approved, if the CIBIL score is less than 750, the interest rate will be high. If the credit score is low, the bank and NBFC will reject the application.
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What Is A Credit Score And Its Role In The Approval Of Loans
Your credit score is calculated from 300 to 900. The greater your credit score, the better, since it is more likely to approve it for new credits. The credit score is an important indicator used by lenders to assess the creditworthiness of potential borrowers. It shows your reliability or degree of risk as a borrower. Therefore, it directly affects your eligibility for a loan, the loan amount that the lender will provide you, and the interest rate you must pay. As a result, the lenders can judge the potential risks of lending you funds.
Heres How To Improve A 650 Credit Score:
- Dispute Negatives: If you can prove that negative information on your credit report is inaccurate , you can dispute the record to have it corrected or removed.
- Pay Off Collections Accounts: Once you bring a collection accounts balance down to zero, it stops affecting your VantageScore 3.0 credit score.
- Reduce Utilization: Its best to use less than 30% of the available credit on your credit card accounts each month. You can reduce your credit utilization by spending less, making bigger payments or paying multiple times per month.
- Pay On Time: Payment history is the most important ingredient in your credit score. Paying on time every month establishes a track record of responsibility as a borrower, while a single late payment on your credit report can set back credit improvement efforts significantly.
You can track your credit scores progress for free on WalletHub, the only site with free daily updates and personalized advice.
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Documents Required To Apply For Car Loan
Along with a duly-filled and signed application form, it is important to submit valid documents such as:
- Age proof: Birth certificate, PAN Card, Passport, Voter’s ID or Driving Licence can be submitted as age proof.
- Identity proof: Voter’s ID, Aadhaar Card, PAN Card, Passport or Driving Licence can be submitted as identity proof with a number of latest passport-size photograph.
- Address proof: Ration card or utility bills such as electricity bill, telephone bill and water bill can be submitted as valid address proof.
- Income proof: The latest salary slip, last month’s bank statement, ITR, Form 16, etc can be submitted as income proof for salaried and self-employed individuals accordingly.
Prior to submitting the application form, ensure the particulars furnished by you are valid so as to avoid loan rejection on the basis of misrepresented, false or incomplete data.
Improving Your Credit Score
Fair credit scores can’t be turned into exceptional ones overnight, and only the passage of time can repair some negative issues that contribute to Fair credit scores, such as bankruptcy and foreclosure. No matter the reason for your Fair score, you can start immediately to improve the ways you handle credit, which can lead in turn to credit-score improvements.
Look into obtaining a secured credit card. A secured credit card requires you to put down a deposit in the full amount of your spending limittypically a few hundred dollars. Confirm that the As you use the card and make regular payments, the lender reports your activity to the national credit bureaus, where they are recorded in your credit files. (Making timely payments and avoiding “maxing out” the card will favor credit-score improvements.
Consider a credit-builder loan. Available from many credit unions, these loans take can several forms, but all are designed to help improve personal credit histories. In one popular version, the credit union places the money you borrow in a savings account, where it earns interest but is inaccessible to you until the loan is paid off. Once you’ve paid the loan in full, you get access to the funds and the accumulated interest. It’s a clever savings tool, but the credit union also reports your payments to national credit bureaus, so regular, on-time payments can lead to credit-score improvements.
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Understanding How The Car Leasing Process Works
The car leasing process is an involved one that can be daunting at first. That’s why I’m breaking down all the steps here. Thankfully, this process is pretty uniform in the dealership world and won’t vary much from one car seller to another. And it will also be the same no matter what your credit score.
That said, you may find that your leasing options are less diverse when you have a 650 credit rating. That’s because lenders may be concerned about your ability to make your monthly payments. Unfortunately, that means you will have to compromise on a vehicle that may not suit your needs.
Thankfully, you won’t have to lease a vehicle for an excessively long period and can swap out after your terms are over. In fact, you can even change to a new car during your leasing period. However, this switch will obviously affect your lease, so make sure you fully understand this process before changing your vehicle.
Current Auto Loan Interest Rates
Note: Actual interest rates are based on many factors such as state, down payment, and verification of credit score. Car loan interest rates provided by Bankrate.
Even with a credit score of around 652 or 657, your score is considered Fair credit and you will have multiple auto loan options to choose from.
Usually, people will obtain automobile financing from one of four places:
- Car Dealership
- Online Lender
The vehicle loan options and payment conditions can vary quite a bit by which lender you choose.
We will discuss the pros and cons of each lender option and guide you to the best rates with your credit score.
Inside you will find the estimated monthly payment for commonly borrowed auto loan amounts and the different term options for people with credit scores between 650 and 659.
While a 650 credit score isnt bad, there still is a lot of room for improvement and financial incentives for you to improve it.
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Finding The Right Mortgage
As we said, if your credit score is below your lenders standards, its possible that your first mortgage application wont be approved but, dont give up right away. If everyone with a score under 680 got rejected for mortgages, the population of homeowners in most cities would be sparse, to say the least. That being said, before applying for a mortgage with any lender, its best to improve your credit score as much as you can, since doing so will help you gain access to better interest rates.
Remember, applying for a mortgage is the same as for any other credit product, in the sense that the lender will have to make a hard inquiry on your credit report, causing your score to drop a few points. So, when youre starting to get serious about buying a house, make sure to do some research in advance to find the best lender for your specific financial needs. Loans Canada can help match you with a third-party licenced mortgage specialist that meets your needs, regardless of your credit.
Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service.
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Improving Your Credit Score Right Now
Being right on the threshold with a 650 credit score requires taking a few steps to immediately improve your credit score. Thankfully, there are steps that you can take today that will boost your credit score more than a few points. While these aren’t miracle cures for a confusing credit situation, they can help you get the kind of score you need to get a high-quality car.
These tips can also help to set you up with a long-term plan for managing your credit. It is never too late to start carefully addressing this financial situation and to take steps to pull your credit out of the fair range and into the good.
Start With a Free Credit Report
Checking your credit score can help improve your rate by helping you spot errors and mistakes that decrease your score. You can dispute these errors and improve your rate quickly and efficiently.
After checking your score, make sure that you sign up with a credit tracking company that will spot potential errors and work to address them. What is particularly lovely about this step is that most credit bureaus are likely to boost your score by a point or two just because you checked.
That’s because they see that you are taking it more seriously and are looking to manage your credit.
Make Your Payments on Time
What Apr Can You Expect Based On Your Credit Score
The higher your credit score, the better the auto loan deal you can get. Thats because if you have a proven track record of borrowing money and paying it as promised, the higher your credit score is and the lower the risk you are to lenders. These lenders might even compete with a bank or credit union for your business by offering you a lower interest rate loan.
If your payment history on previous loans is sketchier, however, youre considered a riskier bet in the eyes of prospective lenders. They may think you could quit paying and that they would ultimately have to take steps to collect or repossess the vehicle. In return, lenders expect compensation for extra risk in the form of higher interest rates.
This chart, based on APRs for closed auto loans by credit score on the LendingTree loan platform in 2020, illustrates how your credit score can affect what you pay to finance your car:
If you have poor credit a score of 580 or lower your best option might be to find a cosigner with a better financial track record. Note that a cosigner is responsible for the debt if you default, so make sure the car payment is within your budget to protect your relationship with whomever you ask to cosign. For more in-depth guidance, read our article on how to get a car loan with bad credit.
Higher Scores Mean Better Rates But People With Poor Credit Also Have Options
If youre planning to buy a new car, youll most likely need an auto loan to help pay for it. With the average cost of a new vehicle exceeding $40,000 today, the great majority of buyers in the United States do. Whether you apply for a loan through the dealership or at a bank, the lender will run a credit check on you as part of the process. Heres what credit score youll need to be approved for a car loanand what you can do if your credit is less than perfect.
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Auto Loan Rates For A New Car 650 To 659 Credit Score
Those rates are for people with excellent credit and you probably wont qualify for those offers within our credit score range, such as 653, 654, or 656.
But it gets worse!
These same companies use deceptive advertising practices to lure you in and charge you a much higher interest rate than what you could have gotten from a reputable lender.
The interest rates we use in our sample auto loan monthly payment charts, are current rates for non-prime borrowers with credit scores in the 630s, such as 652, 657, and 650.
If you have a credit score around 650 to 655, it is considered a non-prime credit score, which includes ranges from 600 to 660.
Generally, all people in this credit range will be offered similar interest rates.
As you move into the prime market with your credit score rising to 675 or 700, you will be eligible for better interest rates.
If you are interested in improving your credit score, Credit Knocks offers a 90 day Credit Sprint Challenge to get that score kick started and moving up!
Find Out Your Credit Score Before Buying A Car
Your credit score is the number that is associated with bad or good credit and is formed by the information in your credit report.
Before you even begin looking up cars and driving to dealerships over the weekend, you need to know what your credit score is so you can know what to expect before you even speak with a sales agent. It also helps you stay on budget right from the very beginning.
Car loan rates vary greatly depending on what score you have, so before you start eyeing up $30,000 cars assuming you can afford the payments, know what credit range your FICO scores are in.
Dont just order one of them and assume it is going to be the same as the other two. It very well may not be! In fact, one credit reporting agency may have information about you that is completely different from what the other two have. If thats the case, verify that the information is right.
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Best Auto Loan Rates With A Credit Score Of 650 To 659
A review of the best auto loan rates for new, used & refinanced vehicles based on credit scores between 650 to 659.
If you have a credit score between 650 and 659 then you are right on the edge of a better interest rate.
Most lenders will give you an interest rate break if you have a credit score of 660 or higher.
Disclaimer: Credit score refers to the FICO score in this article. If you have a different score , that does not likely equal your FICO. For example, a 645 VantageScore could equal any FICO score 643, 644, 645? Who knows? You can get your FICO score here.
In this post:
What Is A Good Credit Score For A Car Loan
While the four credit bureaus use slightly different scoring models, a credit score above 700-750 is generally considered good.
Here is how your credit score or CIBIL score can affect your loan approval:
Effect on Your Loan
High chances of your requests for a car loan being approved. Additionally, the car loan approval process will be quicker, and you will also be able to negotiate the best interest rates and loan amount.
With average or middling scores, you can still get approved for a car loan, but lenders will also look closely at other factors like income, number of existing loans, employment stability, etc. Thus, the approval process will take longer and you will likely not get the best interest rates.
Scores less than 600 will adversely affect your chances of getting your car loan approved, and you might get rejected. However, those lenders who do offer you car loans, will offer low loan amounts and high interest rate, or request collaterals like assets, fixed deposits, etc.
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