When you apply for a loan, having a good credit score can help you qualify for favorable rates and terms. However, it is difficult to determine whether or not a particular credit score is good.
This is because the threshold for what is deemed acceptable can vary depending on the type of loan you’re applying for and the lender reviewing your information. There is a likelihood that you will end up with scores that vary based on which credit scoring model was employed by the lenders.
In general, lenders do not disclose their minimum score requirements to the public.
What are the Credit Score Bureaus in the US?
Experian, Equifax, and TransUnion are the three major bureaus competing in the United States’ lending market. This triumvirate controls the market for gathering, analyzing, and disseminating consumer information in the credit markets.
What is the range of Credit Scores?
FICO and VantageScore are two major brands that compete in the loan business in the United States. A good credit score is similar to the FICO and VantageScore scoring models, with significant differences.
What is a Good Credit Score?
Credit score ranges differ depending on the credit scoring algorithm employed (FICO vs. VantageScore) and the credit bureau that pulls the score (Experian, Equifax, and TransUnion).
You can check which credit score range you fall into using the estimates below:
FICO Score –
- Very poor: 300 to 579
- Fair: 580 to 669
- Good: 670 to 739
- Very good: 740 to 799
- Excellent: 800 to 850
- Very poor: 300 to 499
- Poor: 500 to 600
- Fair: 601 to 660
- Good: 661 to 780
- Excellent: 781 to 850
Factors that influence your Credit Score
Depending on the model, credit scores are calculated differently. Here are the main elements that FICO and VantageScore take into account:
- Payment history
- Amounts owed
- Credit history
- New Credit
- Credit mix
What Credit Score do you need to get an Auto Loan?
Cars are frequently among the most expensive expenditures made by the average adult in the United States. For example, in May of 2021, the average price for a light car purchase in the United States was $39480.
When it comes to a large purchase like a car, having good credit can save you thousands of dollars in financing costs.
For example, a car salesperson would tell someone with a FICO score of 620 who wants to buy a new car that they could qualify for a $39,000 60-month loan. Your loan would have an APR of 16.7% in June 2022, and your monthly payments would be $939. In addition, you’d pay an extra $18315 in interest throughout the loan. Even if accepted, a monthly auto loan payment of $942 is a big amount.
Assume you press the pause button and decide to work on improving your credit before applying for a loan. When you reapply later, you discover that you have moved the needle to 670, which is deemed “excellent” by most algorithms.
The FICO Loan Calculator now suggests that you can qualify for an APR of roughly 7.89% with a credit score of 670. Your monthly payment on the same $38,000 auto loan would be $768 at that rate. Over the loan tenure, you’d pay $8106 in total interest.
You would save the following money if you move the needle from poor to the good:
- $171 per month
- $2,052 per year
- $10,208 over the life of the loan
You might be able to save even more money if you have a higher credit score. For example, 720 or higher will almost certainly qualify you for the finest financing deals from auto lenders; a score of 800 is even more reliable.