Your credit score, credit history, and your loan rate work together like a gear and chain. Here are some ways your credit score and credit history affect your loan.
The better your credit score, the lower your loan rate.
If you have an excellent credit score, you may be able to negotiate with your lender for a better interest rate.
Having a credit score is a good thing.
If you don’t have enough credit history to generate a score, you may run into problems getting the loan you want. Most credit scoring models look at payment history and other factors over a period of time. If you're applying for your first loan, you might think you can get a favorable rate because you don't have any blemishes on your credit report. However the lender also can't take a look at your payment history to analyze whether you're a good risk.
Payment history matters.
When a lender pulls your credit report, they can see how well you’ve paid your other credit items and may use that information to estimate how you’ll pay on the loan you’re requesting. For example, let’s assume you already have an auto loan and are applying for another auto loan for your spouse. If you have been late on 3 payments in the past 6 months, those late payments may affect whether or not you get the new loan, have to put more money down, or even need a cosigner.
Every lender evaluates loans slightly differently.
While your credit score is a crucial piece of the loan puzzle, it's not the only factor lenders use to determine whether to grant you a loan. Each lender has their own specific criteria they use when looking at your loan application. If you're new to applying for credit, and you've had an account with Amplify for some time, talk to us first. It's always best to start with a financial institution with whom you have a track record and history when building your credit.