Is 550 A Good Credit Score To Buy A Car?

Is 550 a Good Credit Score to Best Auto Loan Rate?

When one wants to buy a vehicle particularly if he or she wants to finance the purchase with an auto loan, the credit score is rather important. Lenders see a credit score as a gauge of your capacity to pay back the amounts on the credit you obtained. Therefore, if you have a high rating, you increase your chances of being taken under consideration for a loan and getting a good rating, say low interest rate. For one to utilize when purchasing a vehicle, therefore, is 550 a decent credit score?

What credit score can be considered good?

Arriving at a point system, one's credit score can range from 300 to 850; the greater the score, the better. Mostly:

Considered a decent credit score is one between 800 and 850.
Credit ranges go from 300 to 850, hence 740–799 is regarded as a decent credit score.
670–739 is, they find, a reasonable credit score.
Therefore, you will be regarded as having a decent credit score if yours falls between 580 and 669.
One is considered to have poor credit if their score is below 580.

Though it falls in the low category, 550 is a poor credit score; so, it cannot be regarded as very bad. Paying payments on time or having large amounts on credit cards and loans might also be contributing reasons to your credit score of 550. Any score less than 550 will therefore immediately make most lenders see you as a high-risk borrower.

Is it Possible to Finance a Car When You Have a 550 FICO Score?

That being said, having a 550 credit score is considered to be a bad credit rating, yet this does not mean you cannot apply for a car loan. Companies offering subprime credit are available in the market to cater to the needs of credit defaulters. But you will stand to be charged with higher interest as well as other charges as compared to a borrower with a good credit rating.

Here’s an overview of auto loan approval odds based on credit score tiers:

Excellent Credit (751-850): Almost certain that the loan will be granted and the most attractive interest rate, between 3% and 5 % within the framework of the loan for a new car.

Good Credit (681-750): High approval guarantee and a reasonable interest rate is 5-10% for car loans for a new car.

Fair Credit (601-680): You will likely get a loan but it will certainly be at a higher rate, maybe between 10-20% for a used car loan.

Very Poor (500-600): Pre-approval remains possible but you can only get an estimate of an interest rate of about 18 to 30 percent from a subprime lender, coupled with the down payment.

As has been shown above, with a credit score of 550, you are likely to struggle for auto loan approval with reasonable interest rates. You are also sure to pay a higher down payment when leasing a car than you would when buying one. However, some subprime lenders deal with clients in your score bracket and hence car loan approval is possible provided you have a steady income. Just prepare to pay higher interest rates for the privilege of obtaining a loan as a newly minted credit risk.

Reading the article Tips for buying a car with 550 credit

If your heart is set on buying a car but your credit score is 550, here are some tips that can help:

Cut costs on almost everything to save for a better downpayment that should be at least $2,000 or 20% of the car’s price. It does so to show the lender that you’re serious and at the same time reduce the amount you would require to borrow.
It is also relevant to try to obtain a loan at a bank or credit union that is located close to the client. Finally, they may be more inclined than large national lenders to consider your total financial picture when it comes to determining the creditworthy of extending credit to you.
Other favorable qualitative features for a loan application include stable income and employment, minimal credit liabilities, and timely rental or utility bills.
Be ready to receive a higher rate of interest and, in some cases, additional fees for the loan. This offsets the extra lending risk the lender takes into consideration.
Submit your application to several ORIX lenders to compare the loan offers. On the same note, as a subprime borrower, you should want to identify the best loan program that is offered.

The Bottom Line

Of course, having a 550 credit score means that it is virtually impossible to purchase a car, but that is why subprime auto lending is a thing. As long as you are aware that car loan comes with higher rates and fees or charges, if you have a sizeable income and are willing to make a huge down payment, car loan approval is possible. Just brace yourself to incur higher loan costs in exchange for the lender to lend you the cash, knowing that you have very poor credit.

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