For most people who want to purchase an automobile, their only option is to secure a loan from a car lending company. The thing is, obtaining approval isn’t as easy as it sounds. Many lenders take into consideration so many different factors, one of which is the applicant’s FICO score.
Understanding more about how FICO scores work
In the United States, there are three credit reporting agencies that keep track of all taxpayers’ FICO scores. These include Experian, Equifax, and TransUnion. Whenever you apply for a loan, whatever type of loan that may be (including those for credit cards or a home, aside from a car), most lenders will check up on this critical aspect of your life. They will then use it as a determining factor as to whether you qualify or not.
Named after the Fair Isaac Corporation, the organization that developed this grading system, FICO scores actually play such a huge role in gauging an applicant’s ability to qualify for a loan. To determine your credit score, these agencies factor in your previous payment history, current loans or debts, the length of time you had credit, types of credit you have, and whether or not (plus the amount) of credit you recently secured.
How you can turn the tables and get a car loan regardless of poor credit
Most people in the United States have a credit rating of between 600 and 700, a grade enabling them to secure somewhat of a good car loan deal. Those who boast of scores above 700 get the best rates, and those who fall below 600 either get their applications rejected or get really high-interest rates.
The good news is, even when you fall in the 500 or below FICO score bracket, you can still take home a brand new car, much thanks to companies offering bad credit car loan services.
As long as you know where, how, and which company to work with, you can soon change gears in your brand new vehicle despite your poor FICO score.