If you have a high credit score, you could potentially save $10,000 on a new car loan.
You have limited options when it comes to purchasing a new car due to increasing prices and financing rates.
You can potentially influence your credit score, which can significantly impact the savings you receive on the total cost of a car.
The annual interest rate on a loan can fluctuate by up to 10% depending on your credit score.
Financial wellness leads to happiness, wealth, and financial security.
A FICO credit score of 720 to 850 is likely to result in the lowest annual percentage rate, indicating to lenders that you are a reliable borrower. However, scores closer to 500 may result in double-digit APRs or no loan offer at all, especially if it's 600 or less.
How your credit score can affect your monthly car payment
According to FICO, the average annual percentage rate (APR) borrowers are offered varies across different credit score ranges.
- 720-850: 7.5%
- 690-719: 8.65%
- 660-689: 10.42%
- 620-659: 12.57%
- 590-619: 16.94%
- 500-589: 17.8%
To determine your monthly payments for a new car that costs $48,644, based on Kelley Blue Book estimates, and assuming a 15% down payment and a 60-month loan, you can use FICO's calculations for each APR.
- 720-850: $829
- 690-719: $851
- 660-689: $887
- 620-659: $933
- 590-619: $1,027
- 500-589: $1,045
Your credit score will determine the total interest you'll pay on the loan, ranging from $8,366 to $21,370 per month.
How to improve your credit score
Improving your credit score with good credit habits may take several months.
According to a 2023 LendingTree study, individuals with a credit score of 800 or higher always pay their bills on time. This accounts for 35% of their credit score.
Another way to use only a small portion of your credit is by maintaining a low credit utilization ratio, which accounts for 30% of your credit score. Additionally, having a diverse mix of loan types, such as auto, mortgage, and credit cards, and keeping those accounts open for an extended period of time can also positively impact your credit score.
You could potentially save thousands on a car loan due to your credit score.
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