If you’re shopping around for a car loan you may notice the advertised rates are “Typical Rates” this term is always knocking around somewhere! This actually means that around one to two thirds of the people who apply can expect to get the advertised rate, whereas the others will get different rates. Unless your credit worthiness is very good then be extremely cautious when looking for an auto loan (in many cases, manufacturer buy down rates or low interest rates like 1.9% and similar are only offered to those with 700 or above credit scores).

With loans you are unable to find out the actual rate you will receive until you have applied, the more times you apply for loans the more damaging it is to your credit rating! This is very true.  So getting a loan can be very difficult, we’ll look at how a little later.

First let’s look at what exactly your credit rating is. Whenever you apply for, a credit card, a loan, insurance, well actually pretty much anything the person who you are applying to may have a look at your credit report to decide what to do. Even if you apply for jobs some managers have been known to look at your credit rating to assess whether or not you are a responsible person or a good risk.  Insurers will also take a good look at your credit history.

Your credit rating is affected by how reliable you are at repaying money, how many times you have applied for a credit card or loan recently, and whether or not you pay your bills on time. If you take out of lots of credit cards just to benefit from the introductory offers and then move onto the next one which is known as credit card surfing, this could be very damaging to your credit rating (any maxed out cards or cards with big balances will effect your score as they are seen as elevated risks by the credit bureaus which actually are the ones whom assess your individual credit score.  Do not have any maxed out cards if you can afford it and if you do call and have the credit limit raised (just be careful not to use this extra credit).

Lenders are often more cautious when lending you the money to buy a car than when they lend you the money to buy a house. This may seem silly because a house is worth a lot more than the vast majority of cars, but let me explain why. Your house will not depreciate in value, its value will hardly change and there is always a market for it.