Auto Loan Locator explains the prime and subprime credit guidelines for auto loan financing.
Why is your credit score so important when applying for auto loan financing?
Building a good credit history and maintaining it through the years is important. If you have no credit history, it takes time to establish your first credit account. People affected most are young people just beginning careers, elderly people that have not used credit in past 10 years, or divorced or widowed people who shared credit with their spouse that were reported only in spouse’s name.
To build credit history you must have steady income and have lived in the same
area for at least a year. Apply with a local business or borrow a small amount
from your credit union or the bank you have checking and saving accounts. Before
you apply for credit, make sure the creditor reports credit history information
to credit bureaus.
When obtaining a credit report, if you share or shared accounts with a spouse,
had credit under a different name or in a different location that is not
reported in your file, ask the credit bureau to include it. The creditor is
required under the Equal Credit Opportunity Act to report the information under
both names.
If you have been rejected for credit, it is best to wait for 6 months prior to
reapplying. An alternative to credit rejection is to ask a person with an
established credit history to act as your cosigner. A cosigner promises to pay
if you don’t and can thus substantially improve your chances of getting credit.
Once the debt has been repaid, try again to get credit on your own.
What is the quality of your credit?
Auto Credit quality is usually divided into
Tiers. Used as a guide for estimating your current credit rating, the tiers
described below will help you determine which category you fit into prior to
applying for auto credit. Prime to subprime auto loan credit is described below
to assist you in your auto loan financing.
So what are the credit tiers?
EXCELLENT CREDIT:
* An excellent , substantial credit record is needed to qualify for our
lowest rates.
- Estimated guideline 680 + credit bureau score.
- Minimum five years of credit history with at least 5 tradelines, each having a
minimum of 36 month payment history. One of the 5 trades must be prior auto paid
satisfactory.
- Credit history reflects various credit card and installment loan tradelines. Low
usage of credit card lines is evident.
- Homeowner for 24 months.
- No Past due payment history is evident.
- Current Employment and Residence history minimum 12 months at same, with
complete 36 month history.
- Minimal credit inquiries.
GOOD CREDIT:
- Estimated guideline 620 – 679 credit bureau score.
- Credit history is between three and five years, with at least 3 tradelines, each
having a minimum of 12 month payment history. One trade must be $7,500
installment high paid satisfactory.
- Credit history reflects various credit card and installment loan tradelines. Low
usage of credit card lines is evident.
- Homeowner for 12 months is helpful
- Past history must reflect payments received in a timely fashion with no current
delinquent accounts.
- Current Employment and Residence history minimum 6 months at same with complete
24 month history.
- No repossessions.
- Bankruptcy acceptable if discharged 24 months with positive re-established
credit
- Minimal credit inquiries.
FAIR CREDIT:
- Estimated guideline 560 - 619 credit bureau score.
- Credit history of less than three years is acceptable, with at least 3
tradelines, each having a minimum of 12 month payment history. One trade must be
$2,500 installment high paid satisfactory.
- Moderate usage of credit card lines is evident.
- Being a homeowner is helpful.
- General credit history reflects some accounts have been past due in the last 24
months, but current history shows accounts paid as agreed.
- Auto history current for last 9 months.
- 6 months current employment, max 2 jobs in last 12 months, with complete 36
month history. Max 2 addresses in last 12 months.
- Bankruptcy acceptable if discharged 12 months with positive re-established
credit.
- Credit inquiries above minimal.
POOR CREDIT:
- Estimated guideline 520 – 559 credit bureau score.
- Credit history of less than three years may be reflected.
- Heavy usage of credit card lines may be evident.
- General credit history may reflect delinquency over extended period of time on
more than one account.
- Credit history may show several collection accounts.
- Recent Bankruptcy discharge OK based on overall credit and application profile.
No re-establish credit necessary.
- Numerous credit inquiries within last 12 months .
FIRST TIME BUYER:
- Credit score could range from 550 to 700 with no real reporting value.
- No previous car credit history.
- Minimum credit profile.
NO CREDIT:
- No numerical credit score available from the reporting agencies
When in doubt, get your true FICO credit score by visiting a free credit reporting agency, like AnnualCreditReport.com