How Important is Your Credit Score When Buying a Car?
Use these "Credit Road Rules" to help take the stress out of navigating the auto financing highway.
CREDIT ROAD RULE #1: STOP – See where you stand. Knowing your score can impact your decision on a make, model and price.
Good credit scores are the key to negotiating the best interest rates that can lower your monthly payments. Check your scores from TransUnion®, Equifax® and Experian® before you hit the dealer's lot, and understand what is driving your scores so you will be better prepared to navigate auto financing discussions.
CREDIT ROAD RULE #2: DANGER AHEAD – Score-lowering errors left unaddressed could impact your interest rate. Remember, the lower your score, the higher your rate.
Undetected errors on your credit reports can damage your scores and run your car-buying plans into a ditch. File a dispute to correct any errors or remove damaging outdated information before you start kicking tires.
CREDIT ROAD RULE #3: RED LIGHT – Put the brakes on opening any new credit cards.
An inquiry into your credit is unlikely to affect your score. However, multiple new inquires can lower it. Plus, racking up more charges will increase your debt-to-income ratio, which won’t score you any points with lenders when you find your sweet new ride.
CREDIT ROAD RULE #4: GREEN LIGHT – Get preapproved to remove doubt about the rate you will be offered.
Get preapproved by your bank or credit union for a loan amount and interest rate before you step onto the car lot. Now, you don't have to wait anxiously while the dealer checks your credit
. Even if he works with multiple lenders, you'll be better prepared to negotiate a great deal.