How Credit Score Affects Your Chevy Purchase

Every time you take a step related to debt, whether it’s as small as making the minimum payment on your credit card bill or as big as filing for bankruptcy, you’re affecting your credit score. This number between 300 and 850 is an approximation of your financial fitness as it relates to credit risk, and it’s based on your credit history. The higher your score, the lower a lender’s expected risk when you borrow money.

You probably know that you need to be aware of your credit score when you go to buy a home, but did you know that the same principles apply to a car purchase? Before you head out to your Grapevine Chevy dealer, take a few minutes to understand how your credit score is going to affect your purchase. Here are three ways that this little three-digit number will impact you.

1. Major Factor in Approval for Financing

Before you get offered a loan to purchase a Chevy, the dealership will pull your credit score and evaluate your personal finances. This is because the lender wants to see that you make enough money to cover your car payments and that you were consistent with making payments when you borrowed money in the past. If your credit score is below the lender’s cutoff, you won’t be able to get financing at all, at least not without a co-signer.

2. Affects Interest Rate on Purchase

Getting approved isn’t the only time your credit score will factor in. Once a lender has decided to approve your car loan, the lender will use your credit score to determine what interest rate you’ll pay. A low credit score means it’s a risky loan, so the lender will charge a higher interest rate to compensate. You’ll usually qualify for the lowest interest rates on your Chevy purchase if you have a credit score that’s over 750.

3. Impacts Monthly Payments

The interest rate you get will, in turn, affect the monthly payments on your loan. If you have to pay a higher interest rate because of bad credit, your monthly payment will have to be higher to cover the interest. For example, say you want to borrow $25,000 and repay it over the course of five years. If you qualify for an interest rate of 5%, your monthly payments will be $471.78. However, if you have to pay an interest rate of 15%, your monthly payment will jump to $594.75.

As your Chevy dealer, we want you to understand how you can qualify for the best possible financing. Check your credit score before you shop for a car. If it’s not as good as you would like, dispute inaccurate information, catch up on payments, and pay down your credit card debt to boost your score before your purchase.

Financing Your Chevy

So you’re about to purchase your first car. First of all, give yourself a hearty pat on the back – this is a big accomplishment that shouldn’t be taken for granted. Done celebrating? OK, now it’s time to get serious. You’re going to need to narrow down your vehicle options, both in terms of price and what you need. You’re going to want to shop around to get the best possible price you can. Then there’s that dreaded aspect of financing your vehicle. We’re confident you’ve got the first two steps covered, so we’ll concentrate on the latter.

Here’s a look at three tips and things to keep in mind when you’re financing a vehicle:

  1. Things aren’t always as they seem: You’ve probably seen the ads promoting zero down, zero interest, zero etc. Realize that this type of deal only applies to highly-qualified buyers. In other words, if you don’t have an outstanding credit score, you’re probably out of luck on a deal like this. Think of it this way – if something sounds too good to be true, it probably is too good to be true, whether you’re buying a new Chevrolet or an end of year model.
  2. Speaking of credit score… Yeah, you’ve likely seen the commercials about services you can purchase that will tell you your credit score. Credit score determines a lot of things in life. For instance, your credit score likely will determine a) if you qualify to receive car financing as a whole, and b) what kind of interest you’ll have to pay if you’re granted a car loan. If you’re just out of college and buying your first car, your credit score might not be as high as you think. Student loans, as well as not having a lengthy credit history for the bank to observe, are all factors that may not be working in your favor as it pertains to your credit score. That’s not to say you can’t get a loan, just don’t get your hopes too high as to what kind of interest you’ll pay.
  3. Don’t be afraid to refinance: So you bought your car from your favorite DFW Chevy dealer. Congrats (again)! Now, in a month, year, two years – whatever – don’t be afraid to explore refinancing options with your local bank or credit union. Often times, as your credit score improves, you’ll qualify for a better interest rate, which can save you tens of dollars per month. That adds up in the long run! So after you’ve bought your car, keep an eye on your bank or credit union to see when they’re running any refinancing specials.