Auto Credit VS Personal Credit
While almost everyone has at least an infraction or two on their credit report, most people don’t realize that there is a difference between a personal credit score and an auto credit score. Lenders of automotive loans use an individual’s auto credit score to determine how much money he/she is able to borrow in order to purchase a new car, even if the individual has a poor or less-than-perfect personal credit score.
- How Your Personal Credit Score Is Affected
Your personal credit score is largely based on how much money you owe on past-due accounts, but can also be affected by how many accounts you have active at any given time as well as how often you apply for loans. A personal credit score can range from 300 – 850, with a fair credit score being around 600. While your personal credit score is used by credit agencies to determine your loan eligibility for things like mortgages, credit cards, and other loans, it is not a factor in determining your eligibility for auto loans and does not seriously affect your auto credit score.
- How Your Auto Credit Score Is Affected
Your auto credit score is largely based on how much money you owe on previous auto loans as well as any settlements that were made for less than the total amount owed. Auto credit scores can also be affected by late payments and the individual’s overall credit history from the previous two years. While having a good personal credit score can positively affect your auto credit score, you may still qualify for an auto loan even if you have a bad personal credit score. Like personal credit scores, auto credit scores can range from 300 – 850 with a fair credit score ranging from 615 to 684.
- How To Raise Your Auto Credit Score
There are several easy ways to improve your auto credit score. First of all, you should always make sure that you pay any auto loan payments that you currently have on time and never allow an auto loan to go to collections, as it will have a significantly negative effect on your auto credit score. You should also try to keep your personal credit score in check, as it will be a good sign to auto loan lenders that you are responsible enough to pay your bills on time. However, most auto loan lenders will lend money to individuals who have bad personal credit due to studies that have shown that most people will pay their auto loans on time, even if they have to forego other bills. Another good thing to keep in mind is, like your personal credit score, your auto credit score can be negatively affected by applying for many different loans throughout the year. To avoid being penalized from credit issuers, you should complete all of your credit applications within the same 14-day period.
Author Bio: Brandon is from Motorscore.com, the world’s leading car review aggregator.