Although it may not be the first thing on your mind when thinking about buying a car, the fact is that your credit score can make or break your next auto loan decision.


Unfortunately, it does not take much for an average credit score to drop or rise, putting you in an interesting position if you’re applying for an auto loan. Unless your credit score is within a certain defined range, you may find it difficult to finance your next vehicle. 

What Financial Institutions Consider Good, Fair, And Bad Credit

Three major credit reporting agencies collect and measure data related to your credit score: Experian, TransUnion, and Equifax. 


Each of these reporting bureaus has its own set of data to help them make the best decisions about the numbers behind your reported credit score. There are five FICO categories used to define your score:


  1. Very Poor: 300-579

  2. Fair: 580-669

  3. Good: 670-739

  4. Very Good: 740-799

  5. Excellent: 800-850


Remember that the ranges for each category depend on the unique considerations of the reporting bureaus.

What Is The Effect Of A Good Or Bad Credit Score?

As you might imagine, bad credit scores often result in:


  • Expensive auto loans, mortgages, and personal loans

  • Higher monthly payments

  • Higher interest rates on credit cards

  • Difficulties securing apartments or other rental housing

  • Up-front security deposits for utility services

  • Expensive insurance premiums

  • Denied employment opportunities

  • Fewer phone contract options


Although not all of these scenarios will be present in each bad credit situation, having a poor credit score will significantly impact your financial opportunities and decisions.


In contrast, good or excellent credit scores open up several windows of opportunity and help make shopping for your next auto loan much simpler. It provides:


  • Low-interest rates on auto loans, mortgages, and personal loans

  • Higher limits on credit cards

  • Higher chances for auto loan pre-approval

  • Lower premiums for car insurances


Having excellent credit may seem like the answer to all auto loan problems, but the reality is that getting a great auto loan does not require an excellent credit score.

Best Practices For Obtaining A Bad Credit Auto Loan 

Although poor or bad credit scores can keep you from getting the best auto loan possible, it certainly isn’t an impassable barrier for getting into a new-to-you-vehicle. 

1. Stick to your budget

Know how much car you can afford, and how much you can comfortably pay per month on an auto loan. Shopping within a clearly defined budget is an excellent way to stay on-track and above water in the coming months.

2. Save for a down payment 

It goes without saying, the higher your down payment, the lower your monthly payments. 


There are several calculators and other tools to help you estimate monthly payments based on the down payment you make. 

3. Opt for a term that’s doable for you 

Loans with longer terms are generally much cheaper month-to-month and provide greater flexibility in your monthly bills. Shorter terms are more expensive per month but accumulate less interest over time.


Choose the term length that balances with your budget and lifestyle. 

4. Get auto loan pre-approval 

Getting pre-approved for an auto loan simplifies the car buying process, and makes you a priority shopper for any seller. 


Pre-approval may also help to lock in the budgeted price point of your next vehicle.

5. Improve your credit score 

It may seem like a daunting thought, but raising your credit score even a few points can increase your chances of receiving a great auto loan rate and terms.


If you have a few months to work on your credit, do it. Make on-time payments on other debts and bills, use your available credit wisely, and don’t open up new lines of credit until you’re ready to apply for an auto loan. 

Bad Credit Auto Loans: Banks vs. Credit Unions 

Traditional banking institutions are for-profit organizations, meaning that they are more selective of their customers when offering auto loans and other financing options. 


Credit unions benefit all members, not just the select few with stellar credit. 


As a not-for-profit institution, credit unions are collectively owned by members instead of a corporate body. Offering competitive interest rates, reliable member service, and flexible financial services, they look at financial standing and credit on a case-by-case basis, making it easier for you to get a bad credit auto loan or other financing solution than you would at a bank. 

Choose Fort Lee FCU For Your Auto Financing Needs

No matter where your credit score may fall on the scale, a credit union like Fort Lee FCU is a smart choice for your next auto loan. We’ll help you get where you need to go faster with rates and loan terms that make sense for you.