How Lenders Evaluate Your Credit Score When You Buy a Car
When you apply for a car loan, the lender will check your credit history and your credit score. It’s important to note that lenders use a variety of credit scoring models, which could affect your borrowing experience. For example, if a lender relies on the FICO Auto Score, which uses a scoring model specifically designed for auto loans, any past payment issues you've had with auto loans could make it more difficult to get approved, experts say.2 On the other hand, if you’ve made on-time car payments for 10 years, that could act in your favor.
Lenders may also look at other factors, such as your monthly debt payments relative to how much you earn, and your employment history. Those factors could improve your chances of getting a lower interest rate even if you have a less-than-perfect credit score.3
And if your credit score is below average, don’t let that hold you back: People with credit scores below 600 account for more than 20% of auto loans and leases, according to Experian, although they mostly opt for used cars.4