How your credit score affects the auto loan interest rate

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When applying for a car loan, one of the most important things to keep an eye on is the interest rate. One thing you can do to get great interest rates is to make sure you have a good credit score.

By purchasing the lowest rates and looking at your credit score, you can save hundreds if not thousands of dollars on your loan over the life of your loan. Read on to find out how your credit score affects your car loan interest rate.

How the rates are related to your credit score

Your credit score is tied to the interest rate you can receive. The higher your credit score, the lower the rate you block.

How your credit score affects the auto loan interest rate

According to Esperiano As of the first quarter of 2020, consumers with the best credit scores were getting first-rate interest rates of less than 4% on new cars and an average of 4.29% on used cars.

Credit score

Average rate for new cars

Average rate for used cars

Deep subprime (579 or less)



Subprime (580 – 619)



Non prime (620 – 659)



First (660 – 719)



Super prime (720 or higher)



As you can see from the graph above, even a small difference in your credit score can have a big impact on the interest rate you receive and the monthly payment you will have to pay to your lender.

How to improve your credit score

When you need to boost your credit score quickly, there are a few strategies you can implement to get a better interest rate. Below are some tested tricks to boost your score, but you can also download ours Credit Score Guide for even more useful information.

Pay your debts

One of the biggest factors affecting your credit score is your credit usage. Consumers should aim for credit usage of 30% or less, which means balances do not exceed 30% of available credit.

If you can, pay off your credit card balances as much as possible. This way you can dramatically increase your credit score in just a few weeks.

Request credit limit increases

Another way to improve your credit usage ratio is to request a credit limit increase on all of your credit cards. Even if you aren’t guaranteed a positive answer, it never hurts to try!

Contesting inaccurate information

In some cases, your credit score can be affected by outdated or inaccurate information. Make sure you get a free credit report check every year to scan your report and correct any incorrect information.

You should be able to challenge any late or missed payments, receipts, and wrongful judgments that may be on your record. Sometimes, creditors even remove late or missed payments as a courtesy.

Avoid taking new debts

When you’re in the process of making a major purchase like a car loan, you’ll want to avoid taking on new debt or applying for new credit cards. Any difficult request on your credit can affect your credit score, and adding new accounts can lower it even further.

You will also need to avoid closing existing old accounts while you wait for your car loan to be finalized. Closing existing accounts can also affect your credit history and credit score.

Pay back the balances in full

If you have some time before you need to apply for your auto loan, a key way to improve your credit score is to pay off your balances in full every month. This means that all purchases and bills you charge to your credit card are paid for within 30 days or before you receive your next statement.

Try a secure credit card

When you have new or unestablished credit, opening a secured credit card can be the perfect way to build your credit report and improve your credit score. Secure credit cards work by holding a (refundable) deposit that you give to the lender in exchange for accessing a line of credit.

Consider debt consolidation

If you’re struggling to pay off your debts and carry balances on a variety of credit cards, taking out a debt consolidation loan or opening a new card and using a balance transfer can be a very effective way to boost your credit score. credit.

Your Credit Score and Auto Loan: Ready to Apply?

At Arbor Financial, our members benefit from low rates and fast approvals that save you money on a car loan or refinance. We can help you make sure your credit score and auto loan work together to get you the car of your dreams at the best price.

In addition to making sure you are getting the best interest rate using the strategies above, getting pre-approved for a car loan will give you a great advantage. Our car loan pre-approval process is simple, and our team is here to help you get started.


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