All You Need to Know About Credit and How It Affects Your Next Auto Loan or Car Lease
Our credit determines so much of our budgets and financial abilities, but what factors contribute to credit scores and how our credit scores affect our purchases can be murky. After all, it's not like you are given a lesson when you receive a credit card or take out a loan. Fortunately, information about your credit score and what it means doesn't have to remain a mystery.
Let us break down what determines your credit score and then how it affects your car buying ability. Once you know what the factors are, you will know what you can expect and what you can do.
What is Credit Score?
Your credit score is essentially a number that indicates how likely you are to pay back a loan or make payments on time. These scores are created through a complex mathematical model that is meant to show your credit risk and your financial reliability. Although information on how exactly credit scores are calculated is not available, there is an outline of the determining factors.
The two largest aspects you should bear in mind are how you pay your debts and how much debt you owe. Your credit score will be negatively impacted if you have a history of late payments on loans, a past bankruptcy, or a court ordered you to pay in the result of a lawsuit.
The Fair Isaac Corporation creates FICO® Scores that are the credit scores that most lenders use to decide your credit risk. A basic outline of how the FICO® Scores are weighted are available and show what factors are the most important for determining your credit score.