When approaching buying a new vehicle with finance, with the lowest rates of course, many buyers can have their priorities mixed up. Many will spend the bulk of their time reviewing rates from banks and finance companies, requesting quotes and submitting applications for offers to consider while ignoring a major factor that will get them the best rates – a good credit score or rating.
The rating forms part of an individual or business’ overall profile which also includes payment histories. When an individual has a lending arrangement or pays bills from providers, those providers report slow and non-payment to Reporting Agencies who compile the rating.
Reports are made by a wide range of companies, not just lenders. Telcos, power providers, credit card companies and government bodies which collect payments. These reports, history and rating are available to lenders when a new application for lending or a new provider payment schedule is made.
Essentially providing lenders with a snapshot of that individual’s history with meeting financial applications. Lenders assess the history and rating when assessing applications and offers reflect their assessments. Paying close attention to the profile and history can be an important step in being offered a great rate on a new car loan.
Importance of Credit Score when Applying for Car Finance
An individual’s score, history and rating are extremely important when seeking car finance. Lenders review this information and assess the risk factor of that individual. A poor rating and slow paying history can be viewed as a high risk application. Lenders consider that the individual is at higher risk of defaulting on the car payments than an individual with good history and high rating.
The lender’s assessment is integral to the interest rate they will offer to that individual for their car loan. As a rule of thumb - the lower the rating the higher the rate. The higher the rating the lower rate. This is highlighted in many lender advertisements and displays of their best interest rates which are noted as being ‘for good rating applicants’, or similar wording.
But it’s not only the interest rate that can be impacted by an individual’s poor history and rating.
Based on rating and history, lenders may set a credit limit for the funding. This can affect which vehicles may be purchased and if the buyer will need to make a down payment or be approved for no deposit car finance.
the term of the loan may also be impacted and this can affect the monthly repayment. Any additional collateral required can also be impacted by a poor history.
A good rating is extremely important when applying for vehicle funding as is, connecting with the lender that suits that rating level. Lender approval criteria vary across the market. We know the criteria of our many lenders and match the applicant with the lender best suited to make the best motor vehicle lending offer.
Multiple Applications Impact Credit Score
In their efforts to find the best car loan with multiple applications and quote requests, many buyers are not aware that they are potentially damaging that all-important rating. Ratings and scores can be impacted with multiple applications for the same loan.
Lenders report these interactions with the Reporting Agencies, they appear in the history, and may be seen as desperate efforts by the applicant. This can easily be avoided by using our broker services.
Maintaining and Improving Credit Score
In times of high costs of living when some are feeling pressure on their budget, paying bills on time and ensuring there are sufficient funds in bank accounts for scheduled repayments can be challenging. While it is challenging, it should, wherever possible, be prioritised.
A good payment history enhances the rating and a poor history can downgrade the rating. To maintain a good rating to contribute to a good rate for your upcoming vehicle finance, stay on top of those payments.
To check your current rating and for ways to improve a poor credit score, refer to information readily available at Moneysmart. Information is posted on how individuals can get a free copy of the report.
Securing Competitive Rate Car Loan for Range of Credit Score Buyers
Using a broker can be an important decision to ensure the most competitive car finance rates are achieved. Our efforts in covering off on 80+ lenders does not affect an individual or business rating. As specialist motor vehicle finance brokers, Jade Car Loans assists buyers with a diverse range of credit score profiles to secure workable affordable finance.
We focus on securing the right lenders that match the profile and negotiating the best rates. Those with a poor rating and poor history can discuss their circumstances with one of our brokers and request we explore the options for poor credit vehicle finance.
If you’re planning to apply for a Secured Car Loan or business vehicle financing, don’t ignore your score!
Contact Jade Car Loans 1300 000 003 for a car loan quote for all types of credit score profiles.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.