When you were young, the only scores you probably ever worried about were those on your examinations. But, now that you’re old enough to buy your own car, you realize that you’re still worried about another kind of score – a score that can make or break your application for a loan. Yes, this is referring to your credit rating.
What is a credit rating?
Credit rating is like the numerical representation of your credibility as a borrower. It is often based on your credit report and history which are compiled by credit bureaus. Through your credit rating, lenders no longer need to sift through files of your financial records or transactions to check if you’re a reliable or a risky client.
How is a credit score calculated?
The Fair Isaac Company (FICO) score is the most common version of credit scores that creditors usually use. Various components of your financial records such as payment history, existing assets, debt level, and length of credit are used to calculate your FICO score which could range from 300 to 850. The ideal and most favorable score would have to be 720 or higher.
Why do credit ratings matter in loans?
If you reside in Canada, an auto dealer in Toronto is most likely to check your credit rating before making car loan offers. Because high credit scores mean greater reliability, a lender usually gives better interest rates and special purchase prices to individuals with commendable credit ratings. On the other hand, low ratings are red flags that can signal a future default, something which creditors are definitely staying away from. Hence, if you’re planning to apply for a loan, it would be wise to wait until your credit rating is at a more ideal level.
Does bad credit equate to zero possibility of getting a loan?
Fortunately, your dream car won’t slip away even with low credit. There are several bad credit car loans Toronto locals can resort to should they find it necessary. However, providers of these types of loans may have higher interest rates and will likely be a lot stricter when it comes to payment.
Financing an auto Toronto dealerships sell can be significantly influenced by your credit rating. So, take time to mull over the facts mentioned above before applying for a car loan. If you want to learn more about this topic, you can visit ehow.com/how-does_4565415_bad-credit-affect-car-loan.html.
Basic Things You Need to Know: Credit Scores and Car Loans