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GET A BETTER CAR AT A LOWER RATE

BAD CREDIT AUTO LOANS & LEASES

If you need to finance a new or used vehicle, pay close attention to your credit score. Lenders use it to determine the rate you’ll get on a loan whether you’ll get a loan at all. Those with higher scores generally receive the best rates, and finding the cheapest possible financing is becoming more important as the amount and length of auto loans continue to grow.

How Bad Credit Can Impact Car Insurance Rates

While almost everyone knows that having a bad credit score can impact the ability to get loans or the interest paid on loans and for credit cards, many people do not realize that having a bad credit score can hurt you in other ways. For example, employers may check your credit history and use it to decide whether to offer you a job, and insurance companies in most states can (and do) use your credit history to determine your car insurance rates. People with bad credit can pay 15% to 20% more for the exact same coverage as people with good credit.

If you are like us, you may wonder why credit impacts car insurance rates. After all, if you miss a premium payment, your car insurance is canceled, so it is not like the insurer is extending you any goods or services on credit. It turns out that the group of people with bad credit and the group of people who are higher risk for auto accidents has a lot of overlap, which is called correlation. If you remember high-school science, you may remember your teacher telling you that correlation does not equal causation. In other words, just because people with bad credit are more likely to be bad drivers than people with good credit does not mean that having bad credit makes you a bad driver. But, to insurance companies, it does.

So, why do insurance companies charge people with bad credit higher premiums than people with good credit? Because they can. Unless you happen to live in Hawaii, Massachusetts, or California, where laws prevent insurance companies doing it.

Is it fair for insurance companies to use credit scores to determine premiums? We don’t think so, but fair and legal are not the same thing. Fortunately, at Square One Credit, we can help you raise your credit score and ultimately save you money, not just on things like interest for loans, but also on things you have to have- like car insurance.

THE AVERAGE CREDIT SCORE NEEDED TO BUY OR LEASE A CAR

Borrowers who received financing for a new car in 2018 had an average credit score of 714. Those who borrowed funds for used cars had an average score of 655. Experian used a credit score model of 350-850. The difference between a 500 credit and a 700 credit score is around $215 a month in interest charges. If your financing term is 72 months long, you are looking at $15,480 in additional money owed.

PERSON 1

CREDIT SCORE 500

PERSON ONE, WITH A CREDIT SCORE OF 500 WILL SEE AN INTEREST RATE BETWEEN 17-19%. WHEN BORROWING $25,000 OVER 72 MONTHS THE MONTHLY PAYMENT IS $584

Automotive Credit Repair Company

Person One & Person Two are buying the SAME EXACT CAR. The only difference, 200 points in their credit score. That is $215 per month which is over $15,000 on a 72-month loan. Person One will be paying a total of $40,000 for the SAME EXACT CAR.

PERSON 2

CREDIT SCORE 750

PERSON TWO, WITH A CREDIT SCORE OF 750 WILL SEE AN INTEREST RATE BETWEEN 2-4%. WHEN BORROWING $25,000 OVER 72 MONTHS THE MONTHLY PAYMENT IS $369

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