Your Credit & Car Buying: Why Do Those Numbers Matter?

The process of car buying can be scary if you don't know what you're walking into when it comes to financing, and our team knows that being well informed can make all the difference for our customers. Whether you know your credit score or you're completely in the dark, it's important to be prepared for the financing table with that information so you can feel confident in your situation. Know what you can afford and come ready to talk about your credit score.

Your credit score dictates what type of percentage rate you get from the lenders, and the higher the rate, the higher your payments. Poor credit may require a cosigner with a better score, or a hefty down payment, while better credit allows more flexibility and a better loan payment. Drivers with great credit also get the benefit of leasing if they choose, giving them a brand-new car every few years with a lower monthly payment. There are more benefits to knowing your credit score before your test drive, and understanding its place in the buying process is key to getting your best price.

How Does Your Credit Score Affect Car Buying?

As we mentioned above, your credit determines what kind of loan you get and that in turn governs what car, truck, or SUV you end up driving home. If you have a limited budget and your credit score is less than ideal, our budget inventory can help you better your credit over time if you make payments on time. For newer cars, knowing your budget helps you from straying outside your comfort zone financially and reduces the risk of defaulting on the loan.

So, how does your credit get to where it is? Over time, missed payments, high debt to credit ratios, and even hard inquiries on your credit can reduce the score. Having accounts in collections, or even being a cosigner on an account where the responsible party isn't paying their bill can result in a low credit score, which ultimately lowers your chances of getting a good APR. When lenders see a bad credit score, they're not sure whether the payments for the loan will be made. Therefore the risk for them is higher.

What Should You Do Now?

How can you improve if your credit needs some TLC? The first thing to remember is that avoiding late or missed payments is the first line of attack, following by paying down high accounts on your credit. Whether you have student loans or credit cards, maintaining a solid payment schedule and paying down high balances will improve your score. The more delinquent accounts, the lower your score, so actively working to reduce those is key to improvement. Also, signing up for a secured credit card may help, as long as payments are made on time and your balance remains zero.

Good credit is created by making on-time payments, keeping your credit card balances low, limit new credit applications, and simply monitor your credit to ensure no errors are reported. In the event of data breaches, your credit may be at risk, so it's wise to keep an eye out for trouble before it hits. When you maintain a high credit score, you can consider buying or leasing, and with a lower APR, more of your payments will go towards principal instead of towards interest.

Stop By Our Dealership and Consult with an Expert

Questions? Our team wants to help, so reach out to us and we'll see what we can do for you. Our financing experts can help you determine where your score falls, and if you want to know your score prior to visiting for a test drive, fill out our application or check your credit score. Getting preapproved also reduces the risks of having too many hard inquiries, so consider speaking with a lender before your test drive.