Truth is power. Know the facts to help avoid problems

Far too many people have preconceived notions about their credit score and what it means in terms of their getting an auto loan. But often, those notions may not be accurate. This article will give you an overview of the more common myths about credit scores and credit scoring and what the truth is versus those myths.

If you have a credit problem and are trying to figure out how to improve your situation, the FTC has a [clink id=”48″ target=”_blank” title=”Dealing With Debt” rel=”nofollow”]great section on their web site[/clink] about dealing with debt.

Myth #1: A low credit score means I can’t get a car loan

This simply isn’t true. What is true is that your credit score will almost always affect the interest rate that you pay for the loan you do qualify for. A lower score will typically mean a higher rate and a higher score will typically mean a lower rate all things being equal. Remember, lending institutions will consider many factors when considering your loan application. This will include things beyond your credit score such as your employment history, how much debt you currently have, the reasons why your credit score is lower than you may like, and much more. Depending on these other factors, along with the lender’s particular underwriting policies and guidelines, you may very well be offered a car loan.

Myth #2: Lenders won’t consider “extenuating circumstances” impacting my score

The fact is exactly the opposite. In truth, lenders will want to know about extenuating circumstances when they are evaluating you for a loan. For example… Let’s say you have a difficult credit situation that can be traced to a particular incident – such as a business downturn, health problem, or job loss – and you can show that before the incident your credit was good. In this case, a lender will probably look more favorably on you than a person whose credit score is low simply from being irresponsible with their borrowing and not making their payments. If you have extenuating circumstances and you can show that to a lender, it will probably help your case.

Myth #3: It’s very difficult to improve my credit score

You may be surprised that improving your credit score may not be as difficult as you think. In fact, a few adjustments and changing your attitude towards debt may help improve your score quite a bit. That’s not to say that it won’t require effort on your part and, perhaps, some changes in your lifestyle, but it will be worth it in the long run. The fact is that a low credit score will cost you a lot when you try to borrow in the future. A car loan interest rate for a good credit consumer may only be slightly above prime… but a car loan interest rate for a bad credit consumer could be three or four times (or more) the rate paid by the good credit consumer. That could translate into hundreds and perhaps thousands of dollars more in terms of the overall cost of the loan. The folks at Fair Isaac Company, who developed the credit score system, have a [clink id=”49″ target=”_blank” rel=”nofollow”]great article[/clink] with tips on how to improve your credit score that is worth reading if you want to be a better credit borrower.

Myth #4: Applying for credit will hurt my credit score

While there is some truth in this, because lots of requests for credit do equate to a higher level of risk, for the most part, a reasonable number of credit “inquiries” won’t affect your credit score by much. In addition, when people look at getting a car loan or a mortgage, during that time they may have a few inquiries show up in a relatively short period (For example, if you are out shopping for a car and go to a few dealerships or lenders to get your auto financing, you may end up with multiple inquiries showing on your credit report because each of the dealers will probably “pull your credit”. Because the scoring takes into account that you are “shopping around for a car” these are often treated as a single inquiry, which probably won’t impact your credit score by much).

Myth #5: A low credit score means most lenders and dealers won’t work with me

While it is true that many lenders and dealers want to work with better credit consumers in the world of auto loans, there are also many out there who actually specialize in helping people with bad credit get vehicle financing. The real problem with this myth is that a person with bad credit may take the first loan offer (and car deal) that’s made to them and not shop around for a better deal. This is a big mistake. When you are looking at a vehicle purchase and obtaining financing for that purchase, you should always get at least two to three different, competing offers. Plus, you should always do your homework and research interest rates, the vehicle(s) you are considering, and the dealerships and/or lenders you are looking to work with. This is how you protect yourself from problems. Experian has a [clink id=”50″ target=”_blank” rel=”nofollow”]good section on credit inquiries[/clink] on their site that can give you more information about how credit inquiries can affect your score and your ability to get a loan.

Myth #6: Credit scoring creates discrimination in lending

This is another myth that many people believe. In truth, the credit scoring system is, in itself, “color blind”. The fact is that personal information such as your race, gender, religious affiliations, nationality, and marital status are not included in your credit scoring at all. To protect people from discrimination in lending, the [clink id=”51″ target=”_blank” rel=”nofollow”]Equal Credit Opportunity Act[/clink] was established in 1974. If you believe that someone had discriminated against you in lending practices due to factors outside your credit you should contact your state attorney general, the [clink id=”52″ target=”_blank” rel=”nofollow”]FTC[/clink] ( and/or the [clink id=”53″ target=”_blank” rel=”nofollow”]Consumer Financial Protection Bureau[/clink] (

Myth #7: Checking my own credit report is not necessary

This is a big myth that needs to be dispelled. Far too many people don’t check their credit report on a regular basis. This is a mistake. Why? Because of mistakes! People who are in the business of reporting information to the credit bureaus are just as capable of making an error as you and I are. That means that you could have issues on your credit report that aren’t even of your own making. And that means your credit score may be lower than it should be. You should check your credit report at least once per year to make sure reporting errors aren’t showing up. In addition, you should review your credit report to help protect yourself form identity thieves as well. You can get your free credit report at [clink id=”4″ target=”_blank” rel=”nofollow”][/clink]. This web site shows you what you need to do. In addition, Equifax has a great article on [clink id=”54″ target=”_blank” rel=”nofollow”]Credit Report FAQs[/clink] that you may want to review.

Myth #8: You need to carry debt to have a good credit score

This isn’t true. If you’ve been good about paying off past credit accounts and loans, you don’t have to show any amount of debt to have a good credit score. The credit scoring system is there to tell lenders how good you are at paying back money that’s been loaned to you not whether or not you currently have debt. This myth is dangerous because carrying debt actually could negatively impact your credit score and, if you are carrying balances on credit cards with high interest rates, you could be paying a lot to carry a balance without reason.

Myth #9: A low credit score doesn’t hurt me “that” much

This is a big myth that you need to get out of your head right away. Too many people “shrug off” their bad credit score and don’t do anything about it because they don’t think it will hurt them that much. As was noted earlier in this article, a low credit score will typically mean a much higher interest rate when you borrow money versus a person with a high credit score. On an auto loan, depending on how much you borrow, your low credit score could mean paying hundreds to thousands of dollars in additional interest versus a high credit score consumer. Over your lifetime, the impact on your finances could be considerable. Don’t fall into the “it’s okay to have a low credit score” trap. If you have a low credit score, do something about it.

Dispel the myths and get educated about credit and car loans

These are just some of the myths about credit scores that you need to be aware of. The bottom line is this: Educate yourself about credit and what it means to be a good credit consumer. Education is key in many areas of life, but in the area of borrowing, it is critical. Far too many people get taken advantage of by “slick salespeople” when they are looking to get a car loan (or loans for anything for that matter). The only way to protect yourself from a problem is to have the right information available to you when you need it. That means doing your homework about all the aspects of your car deal – including the financing. So get educated… and make a good deal. is here to help you make a connection with one or more auto dealers or lenders, many of whom are in the business of helping people with bad credit get the car loan they need. Our application process is free and easy, and the best part is that you don’t have to work with any connection we make for you. If they aren’t giving you a good deal, walk away and work with someone else. Lastly, as was noted earlier, don’t just go with the first deal that’s put in front of you. Get some competition going and make them work for your business. That’s just smart.

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