It is wise to check one's credit standing prior to making a car loan application. It is generally assumed that only a few shoppers have an excellent credit rating to avail of the lowest interest automobile loans. This is not a true picture. Experian, one of three large, authoritative credit bureaus published that about two-thirds of all loan applicants for purchasing new cars belong to the Prime category. About 44 percent are rated as belonging to the highest category. The latter is known as 'Super Prime' in the lexicon used by Experian.
Lenders generally divide the credit scores into different categories. It could be five categories- Excellent, Good at one end, and Poor, Bad at the other. Fair will fall into the middle category. Experian, for its part, uses tiers like Super Prime (score 740 and above), Prime (ranges from 680 to 739), Nonprime (from 620 to 679), Subprime (from 550 to 619), and the Deep Subprime (below 550). The median score of most car buyers is to be found at 681, a good enough number to enjoy lower rates of interest.
Credit information can be obtained without much hassle from any one or all of the three large credit reporting agencies- TransUnion, Equifax, and Experian. These are also known as credit bureaus. Their function is to monitor the credit information of the consumer. All three credit rating agencies track the past and also the present borrowing behavior of any person. The result is a three digit score which supposedly summarizes how much credit-worthy a particular individual is. The law states that you can obtain a free report from all three credit bureaus once a year.
Upon obtaining the reports, one should go over them for errors. Mistakes are frequently found. It is an excellent idea to correct any kind of misinformation which may lower the score. Other than the credit card and loan payment history, the credit bureaus also track total available credit and the current debt. It also tracks how much of the available credit is being used. There could also be negative information like late payments, write-offs, bankruptcies, missed payments, and judgments. Do note that the scores could be different in different agencies. This is due to the fact that each of these credit rating agencies collects information from different creditor lists. The latter reports the payment activity to the agencies. Each agency may use different algorithms to make your credit activity into a score.