What Affects Your Credit Score When Financing a Car?

Drivers in the Freehold, Manalapan and Marlboro area that are a little precarious about financing a car because of the effects that it has on your credit score, don't worry. We're here to tell you exactly what affects your credit score when financing a car. First, we'll let you know where you stand and what will happen when you apply for an auto loan with your current credit score.

Car Financing and Credit Scores

You most likely know where you fall on the spectrum in regards to your credit score. If not, here's a little refresher course: 750 or higher is considered an excellent credit score. In between 700 and 749 is regarding as a good credit score. If your credit score falls into these categories, you'll have no problem securing an auto loan for your new car.

If your credit score is below 700 but above 650, this is considered fair credit. It means that you're on your way to having a good credit score, but you need a little work. As long as you keep up on payments and spend wisely, you can climb the credit score ladder. Poor credit falls between 600 and 649, and bad credit lies below 600. If your credit score falls under these categories, you can still get an auto loan, but it may be difficult.

How Your Credit Score is Affected When Financing a Car

The higher your credit score, the more likely you'll get a great loan with a low interest rate. Given that you're reliable with your payments, the lender will cut you some slack because they know that you're "good for it" when it comes to keeping up with costs. However, if you fail to meet those payments on time, your great credit score can drop significantly.

If you have fair, bad or poor credit, you can still get a loan for your new car, but not at a desirable rate. You'll have to pay more out of pocket. However, if you keep up with the payments, you can climb the credit score ladder to a higher level. When you have less than favorable credit score, the overwhelming interest rate can dig you deeper in debt, so be smart with your car purchase.

Not being able to keep up with your payments - whether they're too much, or the interest rate is staggering - it can have a negative effect on your credit score. This will push you further down in debt and you may not be able to get the right loans. If this happens, the common mistake is opening up more lines of credit. This won't help you land back on your financial feet and you'll be labeled as a "lending risk" to banks and lenders.

The main take away here is that your credit score can be affected negatively if you are unable to keep up with your payments. On the other hand, if you make your payments on time, your credit score will rise. It won't skyrocket, but you'll see that it's keeping a steady pace upwards.

For drivers in the Freehold, Manalapan and Marlboro area, we hoped this article helps you when you go to finance your next car. If you have any question or would like more information, feel free to reach out to us online. Ready to start financing? Use our financial application here. 


 
 

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Contact

Freehold Dodge & Ram

299 South Street
Directions Freehold, NJ 07728

  • Sales: (732) 677-5112
  • Service: (732) 702-0259
  • Parts: (732) 702-0545

Hours

  • Monday 9:00am-9:00pm
  • Tuesday 9:00am-9:00pm
  • Wednesday 9:00am-9:00pm
  • Thursday 9:00am-9:00pm
  • Friday 9:00am-9:00pm
  • Saturday 9:00am-6:00pm
  • Sunday Closed
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