When it comes to credit, there are many more levels than just "good" and "bad." In fact, there are even types within types – bad credit, for instance, can be split into two categories: situational bad credit or habitual bad credit. Read on to find out more about your credit, and how it impacts your ability to get an auto loan.
Credit Score Ranges in the US
There are a few different credit scoring models in the U.S., but lenders typically use the FICO credit score when they're considering you for a car loan. Credit scores run on a scale from 300 to 850, and are broken down into tiers. According to Experian, the FICO credit score ranges are:
- 300 to 579: Very Poor
- 580 to 669: Fair
- 670 to 739: Good
- 740 to 799: Very Good
- 800 to 850: Exceptional
Depending on where your credit score falls on this scale, you have different chances at qualifying for credit, like an auto loan. Some lenders only work with exceptional credit, while others are prepared to offer lending to a wider range of consumers.
Knowing Your Credit Situation
If you don't know what your credit looks like, the first step you should take before attempting to get any type of financing is to find out. To do this, you need to see both your credit score and your credit reports.
You're entitled to a free copy of your credit reports every 12 months, one from each of the three national bureaus: TransUnion, Experian, and Equifax. These can be requested at www.annualcreditreport.com.
When you get your reports, make sure to go over them carefully to see what information is listed, and check for errors. If you do find mistakes, be sure to contact the reporting bureau to dispute it and have the error(s) corrected.
You can often get your credit score at the same time as your reports, though it may mean a fee. If you want to get your credit score for free, there are plenty of ways to do this.
In many cases, your bank, credit union, or credit card issuer may provide access to it on their website or as part of your monthly statement. If they don't, you can use a credit monitoring service, or look online for a free service such as Discover Credit Scorecard.
Once you have your credit reports and score, you can see where you stand, and then determine which kind of lender is right for you. If you have a good credit score, you're likely to be able to get a car loan through any lender without much hassle. If you have bad credit, you may not be out of luck either, but it could depend on which kind of bad credit you have.
Situational Bad Credit vs. Habitual Bad Credit
Bad credit won't always keep you from getting an auto loan. There are lenders available to help people that are struggling with credit challenges. These lenders, however, are more apt to consider you for a loan if your bad credit isn't a bad habit.
When you have a habit of making late payments, or not making payments at all, it shows up on your credit reports. Lenders can see these things when they're looking into your credit history, along with other negative marks such as bankruptcy and repossession. If these are the types of things dragging down your score, it's considered habitual bad credit, and it may not be looked upon so favorably by lenders. They also look at your spending, and can see if you are in the habit of keeping a balance on your credit cards of over 30% of your limits. All of these factors impact your credit score.
On the other hand, if you have a strong credit history but currently have bad credit that was created by factors outside of your control, like the loss of a job, medical issues, unforeseen illness, or injury, this is known as situational bad credit. Lenders may be more lenient if such an issue has brought down your score but you can show an otherwise good credit history.
Finding a Dealership for Your Credit Situation
Whether you have good credit or bad credit, there's a lender out there for you. With bad credit, those lenders may be more difficult to find, but they're out there, and we can help you find them.
Here at The Car Connection, we work with a nationwide network of special finance dealerships that have lending resources available for credit-challenged consumers. Just fill out our zero-obligation car loan request form, and we'll get to work matching you to a local dealer.