• Jennifer Snyder

Bad Credit or No Credit?

People with bad credit scores are typically charged significantly higher interest rates than people with higher credit scores. As such, loans for higher amounts or longer periods of time cost those with bad credit or no credit significantly more interest over the life of the loan.




Lenders typically look at FICO scores in order to help determine how creditworthy a borrower is. Here are statistics by category, though as a rough rule of thumb anything in the 700s and up is usually good enough to qualify for most forms of consumer lending at a competitive interest rate.


People with lower credit scores may still qualify for credit, but they will typically be required to pay a higher down payment on the loan and/or recieve a significantly higher interest rate on their financing.




What Does a Bad Credit Score Indicate?

Lenders typically loan money with intent to get paid back. People who have low credit scores are viewed as a higher risk and less likely to pay back the funds in a timely manner. Thus lenders are both less likely to lend to them and more likely to charge a higher rate of interest to compensate for the higher risk level. FICO scores are based primarily on 5 factors:


How Much Does a Poor Credit Score Cost?

People with poor credit scores usually pay more for financed purchases. According to Informa Research Services in January of 2013, the national average for a 36-month $20,000 auto loan would have the following costs:


Based on the above chart, a person with great credit might be expected to pay $1,060 in interest over the life of the loan. Whereas a person with a low credit score might pay closer to $5,668 for the same loan, an amount that is 435% higher.


Here are a some ways to save money when buying a car with a bad credit profile:

1. Consider buying a used car that you can afford to pay cash for

2. Buy a smaller & more affordable car this can save money on loan interest costs as well as insurance AND gas. Students who do well in school may also qualify for discounts on insurance rates.

3. Save up to make a larger down payment on your purchase

4. Get a co-signer for your loan

5. Borrow from family for part or all of the loan

6. Get a loan with no pre-payment penalty & make extra payments

7. Build credit with a credit card & regularly pay it off (carrying no balance from month to month) so that you establish a credit history or rebuild your credit before making larger purchases.


Any questions you have about credit and how it might affect your loan application, please reach out to us at info@appcoremn.com We're here to help!

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