How Credit Score Affects Used Financing - And How to Improve It
How Do Credit Scores Work?
When buying a pre-owned car, credit scores determine if lenders are willing to give a loan to you – the score is offered in a numerical range from 300 to 850. Your credit score helps lenders assess how likely you are to pay your loan over time. Generally, the lower your credit score, the higher the interest rates. Our finance department in Ontario, CA, is more than happy to explain how credit scores affect potential loans.
Effect of Credit Scores on Vehicle Financing
Credit scores affect your car financing options in a variety of ways. Here are the four ways credit scores can affect your credit score:
- Interest rates: The lower your credit score, the higher your interest rates will be due to an increased risk factor for the lender.
- Rates of Approval: If your credit score is high, lenders will be more likely to approve your loan.
- Terms of the Loan: Your credit score also affects the period of your loan and down payment. People with higher credit scores tend to have more flexibility in negotiating a loan term and down payment.
- Initial Payment: Lower credit scores may require a higher initial down payment to lower the risk for the lender.
How Can I Improve My Credit Score?
After reading about how credit scores work, you may wonder how to improve your credit score to finance your next vehicle. Our finance options in southern Ontario can give you different ways to raise your score.
The ways you can boost your credit score include:
- Pay off Outstanding Debt: Paying off credit card debt and keeping your credit card balance low can help you increase your credit score.
- Choose to Pay Credit Card Balances on Time: This can avoid late fees and negative reports on your credit.
- Don’t Open Up a New Credit Card: This counts as hard equity on your credit score, which can lower your credit score.
Speak to Our Southern Ontario Dealerships About Credit
If you have any questions about how your credit score affects your financing, please contact CarLoft today. Our pre-owned dealerships in Kingston, Cobourg, Napanee, Cornwall, Carleton Place, and Ottawa make it easy to test drive all of our vehicle inventory from any of our locations within twenty-four hours!