A credit score of 650 falls nicely into the range considered as acceptable for most car loans. Since you have noted a credit score, you have most likely have either paid for your credit score or used one of the score ”estimators” available on many websites. Most people are unaware that the score that you buy or see on an estimator is not the score seen by a lender when you apply for a car loan. No matter, we can help you get approved if you have a score in this range. Just submit your application, and we’ll match you with a dealer or lender willing to fund your loan.
Credit Score for Car Loans
All of the major credit reporting agencies have an auto loan specific score that is only available to lenders. The score from FICO is the one most commonly used and is called the FICO Auto Industry Option Score, also known as an Auto-Enhanced Score. This score takes into consideration all of your past car loans. If you have been responsible by making on time payments and have made at least twelve payments on a single loan or more, then this score can be 100 points, or more, higher than the score that is available to you. On the downside, if you have made even a single late payment or, worse yet, had a repossession, this score can be hundreds of points lower than your other scores. In this way, your lender may see a score that’s significantly from the one you see. If you’ve paid off an auto loan or lease in the past, and done so responsibly, you may be in a better position than you thought.
Factors Considered By A Lender
In addition to your credit score lenders consider a slew of other factors that include:
- Loan to value ratio (LTV).
- Length of loan.
- Vehicle age.
- Vehicle mileage.
- Down payment offered.
- Time on job.
- Gross income (before taxes) per month.
- Total debt to income (DTI) ratio.
Lenders want to see an LTV of 115 percent or less. The key word here is less, with lenders having a best case scenario of 85 percent. Large traditional lenders do not want to offer loans for vehicles that are more than seven years old and/or have more than 100,000 miles. If the vehicle fits into a lenders age and mileage guidelines, your DTI will be looked at. Lenders want to see that you have a DTI of less than 40 percent of your gross income, which usually needs to be at least $1,450 per month, but preferably higher.
When all other factors are considered, a lender is going to determine how long of a loan they will offer you and whether you need to put more money down. At 650, your down payment may only need to be 10 percent in cash or trade, but you may be asked for more if the LTV ratio is too high or if your DTI looks a bit risky. It is in your best interest to offer more down just so you can save on the total interest paid and lower the monthly payments.