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.