Despite brown bag lunches and coupon clipping, there are always some expenses that do not seem to be flexible at all, like high auto loan rates. Consumers are actively seeking ways to reduce their household budgets to more easily manage the economic downturn hitting them from all angles.
For most people, having your own means of transportation is a necessity. For many, this is one of the most expensive things you will ever own. The amount individuals are charged for auto loans can differ greatly from person to person, and the biggest factor contributing to your high auto loan rate is your credit score.
Before agreeing to loan any one money, lenders need to gauge how risky a business proposal will be and checking your credit score as part of the application process is the route they generally follow. FICO (Fair Isaac Corporation) developed an intricate mathematical equation based on several factors regarding how you use your credit. The result is a score ranging from 300-850, and like the SAT's, the higher the score, the better off you are.
Because of the recent state of the economy and the credit crunch, the best auto loan rates are only given to those with outstanding credit (generally at 700 or higher). The lower your credit rating, the more you need to pay to borrow money because the lender will consider you a higher risk. Ultimately, they want to get as much money as possible and if you have a lower credit score, the theory is you may ultimately default on the loan so they want to get as much from you before that happens.
