What Prime Are You?
You heard this before, prime rate, prime steak or prime time. Well in the auto loan business we have some prime terms also. You may have heard these terms before if you have been reading or shopping for an auto loan. Let me explain and see if this makes sense to you.
Prime Credit – This is the best of the bunch. This is the customer who has a credit score over 700, steady income, a combination of a mortgage, installment debt and a long credit history on the credit bureau. In most cases this group of customers can qualify for the lowest rates, zero down payment and can buy almost anything they want with no hassle. Lenders will fight for your business with low rates and when the manufacturers are offering the zero interest rate they want the prime business.
Your goal is to get into this bracket. Once you have established a record of paying your bills on time getting a loan is easy and the car shopping process becomes more on finding the right car since the loan process will not hinder your choice.
Sub-Prime – This is the opposite of prime or the toughest group to find an auto loan. Most of the sub-prime customers will have credit scores under 600 or if they are above 600 it is dropping where they may have been above 700 and it is dropping. If you have filed bankruptcy, been in foreclosure or had a repossession on your previous vehicle getting a car loan is not impossible but takes a little extra effort.
Your number one goal if you are in this bracket is to get out and move up to prime. The first step if you are in this position is to take a look at your credit and identify the problem. Pay your bills on time is where to start. If you have some past collections get them cleared up. I have seen too many customers with a list of small collections that are less than $500 total but it is killing their credit score. Get them cleared up. If you are sued and a collection is in small claims court show up and dispute or settle the bill. Don’t ignore the court date if you want any chance of getting the debt cleared up. If you don’t show up you lose automatically.
If you have bad credit we still have some great options to get a auto loan and give you a chance to get back on track.
Near-Prime – This is the in-between group of customers, your credit score is probably in the 600s or if it is higher you don’t have much history. Getting an auto loan is easier than subprime but you may still need to prove your income or residence but your rate should be more competitive. Credit Unions do a good job of helping customers in the near-prime group and are a good place to start when you are shopping for a car. Find a dealer who works with the credit unions and this would be a good place to shop for a better car.
Just because your credit is in the 600s the lenders are looking at what direction it is moving. If you are moving out of the sub-prime and have established some positive credit history this helps a lot. Lenders love when your most recent history is positive and current. But if you were previously 700 plus for your score and moving down this makes it tougher to qualify for your next auto loan. Ask yourself would you lend you money at this time.
Your goal is to get yourself into the Prime section and stay there. Pay your bills on time and pay attention to your credit bureau.