An excellent credit score will help with which aspect of car financing?

Home Forums Credit Reports & Scores An excellent credit score will help with which aspect of car financing?

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    Jordan Moore
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    #11237
    Team StellarFi
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    In a nutshell, a better credit score means lower interest rates on car loans.

    If you are thinking of buying a car, bringing your credit score to a good to excellent/exceptional FICO® Score range (a score of 670 or better) will help immensely with lowering the annual percentage rate (APR) you have to pay. According to FICO calculations for a 5-year, $30,000 loan, there is a difference in the interest paid even within one category of borrowers. For instance, FICO reports that people with a FICO Score between 660–689 would pay a 9.8% APR. This amounts to $630/month and the total interest would come out to $8,113. On the other hand, someone with a score in the range of 690-719 would pay 8.1% which amounts to $611/month and $6,644 as total interest paid.

    In the long run, you end up saving close to $1,500 as someone on the higher end of the good credit score range. So, someone at the lower end of a good credit score may still end up paying more than someone on the upper end of the same category. Similarly, a person with an 800 credit score might pay relatively higher interest rates than someone with an 820-850.

    But, with an excellent credit score, you are more likely to pay a lower interest rate than someone with a good credit score. The difference in the total interest paid for someone with a good versus excellent credit score could be anywhere between $1,000-$3,000, according to FICO data.

    Investing in a car is a big decision that can impact your finances in the long run. So, it’s important to work on your credit score before finalizing a deal. It is also advisable to save up for a sizable down payment to lower the number of installments and interest rates you pay.

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StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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