The most frequently asked questions about buying and crediting a car


Buying a car is a big decision and many inexperienced buyers tend to have a lot of questions about the process. But it’s not just the car buying process that can be confusing. In fact, many car buyers are inexperienced when it comes to credit in general. In order to help car buyers navigate the process, we decided it might be helpful to compile a list of the most frequently asked questions about car buying and credit.

What is a good credit rating?

Close-up of the top corner of a consumer credit report from the Equifax credit bureau. | Smith/Gado/Getty Images Collection

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The three credit bureaus (Experian, TransUnion and Equifax) measure your credit in different ways. However, the two main credit scoring models are FICO and Vantage. Almost any dealership you visit will check your credit using the FICO 8 model, while online credit sites like Credit Karma use the Vantage scoring model.

Here are the different score ranges for each model:

online credit score chart

FICO Scoreboard and Vantage |

As we can see, a good credit score is between 670 and 739 on the FICO scale and 661 and 780 on the VantageScore. However, Experian notes that many banks consider a score above 700 to be good.

Why do I have so many different credit scores?

If you received your score from different credit apps, websites, dealers, or banks, you might be wondering why there are so many different credit scores. Experian laid out some of the basic reasons why this is:

  • Each of the three credit bureaus maintains its own credit history on you and this history may vary.
  • FICO and VantageScore use different scoring models.
  • Banks and other lenders use different algorithms to calculate your score.

Instead of paying attention to a single score you receive, a better rule of thumb is to think of your score as a range rather than a single number. For example, if you check your credit score using Credit Karma or your bank’s app, they will be quite similar (728 and 735, for example). In this case, your score will likely be close to that obtained by a bank or credit union when you buy a car.

What factors affect my credit rating?

Close up of the Experian credit bureau logo.

Close up of the Experian credit bureau logo. | Smith/Gado/Getty Images Collection

Although different scoring models have different criteria, five main factors can affect your credit score:

  • Payment history: Making regular payments on time each month is important. So your payment history can represent about 35% of your credit score.
  • Use of credit: The portion of your total credit that you use represents about 30% of your score.
  • Length of credit history: The length of your credit history can account for about 15% of your score.
  • Composition of credit: It’s not just about credit cards. Credit bureaus like to see a mix of lines of credit, including other auto loans, home loans, etc. The mix can be 10% of your score.
  • New credit accounts: Any new credit account you open can affect your credit score by up to 10%.

Is leasing better than financing?

In some cases, yes. There are major advantages when it comes to leasing a car rather than financing it. According to Consumer Reports, some of these perks include a lower monthly payment, a lower down payment, possible free maintenance, a new car with the latest safety features, and the ability to drive a new car every few years.

While you can certainly trade in a financed car every few years, there’s a chance it has negative equity that you’ll have to deal with. However, if you lease a car, you can trade it in at the end of the lease or walk away from it altogether.

How much down payment should I put on a new car?

In general, you should aim for a 20% down payment on a new car and 10% on a used car, reports NerdWallet. The more down payment you make, the lower your monthly payment will be. Additionally, banks and other lenders like to see a larger down payment, if possible, to lower your loan-to-value (LTV) ratio. Having a lower LTV can increase your chances of approval because the bank will see you as less of a risk of defaulting on the loan.

Is it worth buying an extended warranty?

A man inspects new Toyota cars on display.

A man inspects new Toyota cars on display. | Justin Sullivan/Getty Images

It depends on the type of car you buy. For example, if you are financing a luxury German car that you plan to keep for a long time, it might be worth buying an extended warranty. Many parts and repairs for German cars can be expensive, so buying an extended warranty can help

Otherwise, many car buyers who purchased an extended warranty when purchasing their car never used it. In this case, it is not worth the money invested. But if you’re buying an older used car with a lot of miles on the odometer, it might be a good idea to buy an extended warranty.

Credit and car purchases

There is a lot of credit and car buying information out there and you can find a lot of it here on MotorBiscuit. We’ve got it all covered, from leasing, financing, trading and selling cars. Visit our Car Purchases section to learn more.

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