If you’re in the market for an auto loan, you’ve probably already thought about the question, “what credit score do I need to refinance my car?”
Surprisingly enough, there’s no single answer to that. Fortunately or unfortunately, you don’t require one true minimum score to qualify for an auto refinance. This is because there are plenty of lenders in the market with specific offers.
Is Credit Score the Only Factor That Determines Your Auto Refinance Terms?
Even though your credit score is a major determinant in a car refinance deal, it isn’t the only one. However, here’s the good news. A bad credit score isn’t the end of the world. Many lenders offer loans to borrowers even if the score is well below 600.
On the other hand, lenders also consider other factors, such as the vehicle condition, existing car loan, debt, and income.
Does Your Credit Score Impact Your Loan Application?
There seems to be a false sense of security associated with credit scores. People often assume that a credit score is the only thing that makes or breaks their chances of landing a good car refinance deal.
Again, while it isn’t the only factor, it does tend to have an impact on the interest rate you land. The rule is, the higher the score, the better your chances of getting a lower interest rate.
Since there are different scoring models, it’s hard to determine which one to use. However, lenders often consider your FICO score, which is divided under the given categories.
- Exceptional: Between 800 and 850
- Very good: Between 740 and 799
- Good: Between 670 and 739
- Fair: Between 561 and 669
- Very poor: Between 300 and 560
Even though there’s no way to fully predict your chances of qualifying for a loan, you can estimate them based on the following:
- Debt-to-income ratio
- Loan-to-value ratio
- Income
Generally, the higher your Debt-to-Income ratio and Loan-to-Value ratio, the better your credit score should be in order to qualify or get approved.
The Bottom Line
In the end, your credit misfortunes can still be offset by other factors in your financial profile. However, a good credit score is one of the best ways to land favorable terms and a better interest rate.
Therefore, make sure to check the credit reports for issues and errors before you apply for auto refinance. Since there are three major credit bureaus (Experian, Transunion, and Equifax), you may want to check for discrepancies before making a leap.
You can also fix your credit by visiting Credit Score Dispute .com