Getting an Auto Loan Today

If paying cash isn't an option, what might you do to be loan-worthy in today's volatile, rapidly changing economy?

Keeping Score
Credit scores are crucial, though they don't reflect the full picture of a person's financial stability. They focus solely on factors that can be measured. Lenders rely totally on what are called FICO scores, which range from 300 to 850. Prime customers–the ones who can still get loans at reasonable rates–rank somewhere above 700 (depending on the lender). Near-prime hovers around the mid- to upper-600s. Scores below 620 or so send the applicant into subprime territory. If those latter folks are able to get loans at all, they can expect to make a down payment of at least 20 percent.


"Most people who don't have good scores have missed payments," said Maxine Sweet, vice-president of public education at Experian. Worse yet are those who've missed payments often, though a late payment isn't necessarily as much of a demerit. Scoring companies consider "utilization, which shows "how much you do owe, compared to what you could owe." Sweet explains that "having a credit card account is one of the most positive" factors, because the amount paid each month is up to you. "It takes more self-management."


Consumers can obtain copies of their credit report from several online sources, including freecreditreport.com. Information on improving your credit score may be found at nationalscoreindex.com (sponsored by Experian).

Credit Unions, Small Banks
Some car-seekers have options, such as credit unions and local banks. "Credit unions are probably a little bit less restrictive as a group," Tracey said. "They tend to accommodate their members." At least one-fifth of auto loans are obtained through credit unions. Also better are "smaller local banks where customers have relationships." Tracey recommends "going back to a lender you've previously dealt with, who might treat you as an ongoing customer."