Whether you’re buying used cars or new, your FICO credit score impacts your final cost.
By Tom Kline, Controller, Virginia car dealer RK Chevrolet
Whether you’ve got your eye on the latest convertibles or are buying used cars, your credit score determines whether or not you’ll receive a loan, and the interest rate you’ll pay. Not familiar with credit scores? They’re three-digit numbers compiled by credit reporting agencies (CRA). The most commonly used is the FICO credit score and ranges from 300 to 850. The median score in America right now is 723. For more details on credit scores, see Part 1 of this series: What is a credit score?
How a higher FICO credit score lowers your interest rate when buying used cars or new cars:
For example, two consumers purchase the same new-model car for $18,000 from a Virginia car dealer. Both buyers apply for a 36-month loan.
- Buyer A’s 710 credit score may net him a 7.328% APR loan
Monthly payment: $558
Total interest payments: $2,106 - Buyer B’s score of 510 could lock him into a 13.378% interest rate
Monthly payment: $610
Total interest payments: $3,952
Obviously, the credit score made a difference: Buyer B pays $1,846 more than Buyer A for the same car.
A lower credit score means a higher final price tag when buying used cars.
Another two consumers are buying used cars from a Virginia car dealer. Car cost: $42,000. Loan term: 48 months.
- Buyer A’s 722 credit score may secure a 7.063% APR
Monthly payment: $1,007
Total interest payments: $6,335 - Buyer B’s 622 score may mean an interest rate of 14.904%
Monthly payment: $1,167
Total interest payments: $14,009
A huge difference—$7,674 same car, same Virginia car dealer!
Check out FICO credit score loan calculator.
Raise your FICO credit score and reap significant savings on major purchases.
Getting on the path to financial health does not have to be difficult. All it takes is bit of know-how and commitment. Here are some steps towards self-help credit repair:
- Know your credit background. You can obtain a free report from www.AnnualCreditReport.com or call 877.322.8228. You can also order your credit score through www.AnnualCreditReport.com – depending on which of the 3 credit bureaus it comes from, the cost is between $5 and $8 apiece.
- Fix any errors that appear on your credit report. For a simple “how-to”, see What to do if you find a mistake on your credit report.
- If your score is low, make the commitment to improve it. Virginia car dealer RK Auto Group helps you improve your credit.
By putting you into a position of having a car loan and repaying it, Virginia car dealer RK Chevrolet can help you raise your FICO credit score.
Raise your credit score by paying bills on-time, every time. Financing a new car purchase or buying used cars is another method of self help credit repair. Learn more about RK‘s Financing Program.
Tom Kline is Controller of RK Auto Group (RK Buick, RK Chevrolet, RK Subaru, RK Scion, and RK Toyota). RK Chevrolet is the recipient of Chevrolet Motor Division’s coveted Service Supremacy Award four years in a row. This is an award which less than 400 of the nation's 5,000 Chevrolet dealers have won. RK Auto Group has been included in the Ward’s Auto list of top 500 U.S. car dealers, and has received the prestigious "Genuine Leaders Award" for excellence in sales, service, and customer satisfaction. The dedication of each employee at RK Chevrolet, RK Buick, RK Subaru, RK Scion and RK Toyota made these awards possible.