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Credit Score Tops Car Loans Eligibility Requirements

By Sally Maison
Published: Sunday, October 11th, 2009

Economic analysts say that excessive lending is what brought America to recession. According to them, lenders keep giving away credit without sufficiently checking if a person can pay back. Now, creditors have learned their lesson and have raised their standards so they will not have to go through the same cycle all over again. Lenders have been stricter in granting loans, including those who operate in the car industry. Analysts note that automobile dealers have raised their eligibility requirements. And on top of those requirements is the credit score.

Credit Score Tops Car Loans Eligibility RequirementsRecently, auto sales soar to a pre-recession record high because of Federal Government’s “Cash for Clunkers” program wherein buyers were given either a $3,500 or a $4,500 rebate if they trade in their older and less fuel efficient cars. The program has ended for more than a month now, but experts note that rebate-boosted buying trends left a momentum in the auto industry. Many consumers still want to own a new and better car which is why applications for car loans are still high. But creditors say, “Not so fast.”

In a recent survey by an independent firm, auto lenders still want an assurance that they will be paid before giving away any car. Hence, they look for consumers who have solid credit scores. Specialists say that auto dealers are more confident in doing business with clients who have strong ability to pay, adding that even lenders engaged in specialized car loans have increased their eligibility requirements.

Specialized car loans are designed for people with bad credit. But lenders only deal with bad credit individuals, not with those who have poor credit, experts note. Consumers whose scores are below 580 may have trouble getting a car loan, according to them. Experts say that people who are within the 580-620 score range are the main target of specialized auto loans since they are charged higher interest rates which means greater profit for lenders.

On the brighter side, there are lenders willing to deal with clients who are within the 500-580 range. But people whose scores are below 499 are in serious trouble for any kind of credit, experts say. Consumers who have bad credit are advised to seek counseling help that could aid them in rebuilding their creditworthiness and consequently their chances of getting better deals from creditors. Experts advise that it is best, even for consumers who have good credit scores, to get an additional boost before applying for a loan. A 30-point rise already has significant implications, they add.

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