Does My Credit Score Really Matter in Vehicle Financing?

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Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - March 8, 2021

Yes – your credit score is a major player in the grand scheme of vehicle financing. Some traditional lenders can turn you away if your credit score doesn’t meet their standards for qualifying. However, there are lenders willing to overlook a lower credit score, if you can show them you’ve got the right stuff to repay the car loan.

Your Credit Score is Vital to Auto Loan Eligibility

Having a good credit score is a cornerstone of being approved for traditional auto loan financing. When we say “traditional,” we’re referring to the typical lenders that likely come to mind, such as credit unions, banks, or the captive lenders of automakers. These lenders are popular avenues for getting a car loan.

The bitter pill, however, is that those auto lenders tend to favor borrowers with a credit score above 660. With a credit score lower than is, or around that range, you’re likely to be considered a bad credit borrower and may be faced with auto loan denial. They put a lot of weight on your credit score and credit history since it’s how most lenders make a snap judgment of your creditworthiness.

Creditworthiness is your ability to repay borrowed money, or how likely you are to be given credit. A higher credit score shows a lender that you’ve handled your past accounts and loans well, while a lower credit score can say the opposite.

Why Your Unique Credit History Matters

Like a thumbprint, your credit history is unique to your personal situation. Your name, address, contact information, and past jobs are all typically listed on your credit reports. What a lender is concerned about, though, is the information about your past loan management.

Many lenders and creditors report your payment history and loan amounts to the major credit bureaus. This means your payments on those accounts – timely or late – are reported and impact your creditworthiness.

The more on-time payments you have reported, the more it reflects positively on your credit score. The age of your overall credit history, how many different accounts you have active, and even the balance of your credit cards all influence your credit score. Big, negative events such as a vehicle repo are also reported and can hurt your chances of getting approved for a car loan for a while.

But there can be more to your individual situation than just your credit reports. Some borrowers go through life-changing events that can cause a lower credit score like a medical emergency, divorce, bankruptcy, the necessary canceling of accounts, or a sudden job loss. For borrowers in these situations or those who need a jumping-off point to build a good credit history, subprime auto loans could be the next step.

Subprime Vehicle Financing

Subprime lenders are third-party and signed up with special finance dealerships. They’re known for assisting borrowers with credit challenges. To see if you’re eligible for a car loan, they look at many aspects of your financial stability.

Since your income, living situation, and even work history can give a lender a better idea of your creditworthiness, subprime lenders examine these along with your credit history. Applying with a special finance dealership that’s signed up with subprime lenders can give you the chance to prove that your ability to repay an auto loan, and show that your credit score doesn’t tell the whole story.

Your credit reports are still important to a subprime lender, though. A higher credit score can mean qualifying for a better interest rate, and possibly better loan terms overall. With a subprime lender, you can also expect a down payment requirement. Most require at least $1,000 or 10% of the vehicle’s selling price (occasionally whichever is less).

You must prove you have income stability and enough available income to take on car expenses like the payment and full-coverage auto insurance. Subprime lenders usually require that you supply documentation such as check stubs, a valid driver’s license, a list of personal references, proof of a working phone, and proof of residency.

Once you’ve gathered your docs and meet the stipulations of a subprime lender, you shop with a special finance dealership to choose a vehicle that fits your needs and fulfills the lender’s requirements.

Begin the Search for a Car Loan Right Now!

While most dealerships have lending partners, not all of them are able to assist borrowers with less than perfect credit. The ones that have those resources don’t always stick out from the crowd. Here at CarsDirect, though, we want to make your search for a car loan easier.

We’ve been connecting bad credit borrowers to dealers for over two decades. Once you complete our free auto loan request form, we’ll look for a dealership in your local area that assists with credit challenges.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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