Your Credit Score Matters When Applying for an Auto Loan
When you’re in the market for a new car, you may think all you need is a steady income and the desire to drive off the lot with a new ride. But your credit score plays a crucial role in determining whether or not you’ll be approved for an auto loan, and at what interest rate. A credit score of 590 may limit your options, but it doesn’t mean you’re entirely out of luck. There are steps you can take to improve your score and increase your chances of getting approved for an auto loan.
Understanding Your Credit Score
Your credit score is a three-digit number that reflects your creditworthiness. It’s based on your credit history, including your payment history, credit utilization, the length of your credit history, and the types of credit you have. The higher your credit score, the more likely you are to be approved for credit at a favorable interest rate.
According to Experian, one of the three major credit bureaus, a credit score between 580 and 669 is considered fair, while a score between 670 and 739 is considered good. A score of 740 or higher is considered very good or excellent. If your score is below 580, it is considered poor and may make it difficult to get approved for credit.
How Your Credit Score Affects Your Auto Loan
When you apply for an auto loan, the lender will review your credit score and credit history to determine the likelihood that you’ll be able to repay the loan. If you have a low credit score, the lender may consider you a higher-risk borrower and may charge you a higher interest rate to compensate for that risk. This means that you’ll end up paying more in interest over the life of the loan than someone with a higher credit score who’s able to secure a lower interest rate.
Credit Score Range |
Interest Rate |
|---|---|
720-850 |
3.68% |
690-719 |
4.66% |
660-689 |
7.02% |
620-659 |
11.69% |
590-619 |
16.45% |
500-589 |
19.50% |
Improving Your Credit Score
If you have a credit score of 590, there are steps you can take to improve your score and increase your chances of getting approved for an auto loan at a lower interest rate. These include:
Paying Your Bills on Time
Your payment history is the most important factor in determining your credit score. Late payments can have a significant negative impact on your score, so it’s essential to pay your bills on time.
Reducing Your Debt
Your credit utilization, or the amount of credit you’re using compared to your total credit limit, is another critical factor in determining your credit score. If you’re using a high percentage of your available credit, it can negatively impact your score. To improve your score, try to pay down your debt and keep your credit utilization below 30%.
Checking Your Credit Report for Errors
It’s essential to regularly check your credit report for errors that may be negatively impacting your score. If you find an error, contact the credit bureau to have it corrected.
Being Patient
Improving your credit score takes time, so be patient and continue to make responsible financial decisions. Over time, your credit score will improve, and you’ll have more options for financing a car.
FAQs About Credit Score 590 Auto Loans
1. Can I Get an Auto Loan with a 590 Credit Score?
Yes, it’s still possible to get an auto loan with a credit score of 590, but you may need to shop around to find a lender that’s willing to work with you. You may also need to pay a higher interest rate than someone with a higher credit score.
2. How Much Will a 590 Credit Score Affect My Auto Loan Interest Rate?
A credit score of 590 may result in an auto loan interest rate of around 16%, while someone with a credit score of 720 or higher may qualify for an interest rate as low as 3.7%. The exact interest rate you’ll receive will depend on the lender and other factors, such as your income and debt-to-income ratio.
3. Can I Get Pre-Approved for an Auto Loan with a 590 Credit Score?
Yes, you can still get pre-approved for an auto loan with a credit score of 590. However, it’s important to shop around and compare offers from different lenders to find the best interest rate and loan terms.
4. How Can I Improve My Chances of Getting Approved for an Auto Loan with a 590 Credit Score?
To improve your chances of getting approved for an auto loan with a credit score of 590, try to pay down your debt, make all of your payments on time, and check your credit report for errors. You may also consider getting a co-signer with good credit to increase your chances of approval.
5. What If I Can’t Afford the Payments on an Auto Loan with a 590 Credit Score?
If you can’t afford the payments on an auto loan with a credit score of 590, it may be best to wait until you can improve your credit score or find a cosigner with good credit. Taking on a loan that you can’t afford can lead to missed payments and damage your credit score further.
6. Can I Refinance My Auto Loan If I Have a 590 Credit Score?
Yes, you can still refinance your auto loan if you have a credit score of 590. However, you may need to shop around to find a lender that’s willing to work with you, and you may not qualify for the best interest rates.
7. Is It Better to Buy a Car with Cash or Finance with a 590 Credit Score?
It may be best to buy a car with cash if you have a credit score of 590. Financing with a low credit score can result in high-interest rates and additional fees. However, if you need to finance your car purchase, it’s important to shop around and compare offers from different lenders.
Conclusion: Take Action to Improve Your Credit Score
While having a credit score of 590 may limit your options when it comes to financing a new car, it doesn’t mean you’re out of luck. By taking steps to improve your credit score, such as paying your bills on time, reducing your debt, and checking your credit report for errors, you can increase your chances of getting approved for an auto loan at a lower interest rate. Remember to shop around and compare offers from different lenders to find the best loan terms for your needs.
Closing Disclaimer
The information provided in this article is intended for informational purposes only and should not be considered financial advice. It’s important to consult with a financial advisor or credit counselor before making any financial decisions. The author and publisher of this article are not responsible for any damages or losses that may result from relying on the information provided.