Credit checks are part of the auto loan process and can make or break an application. But what exactly does a lender look for on your credit report and what do they see?
Our Cayuga auto loan team explains.
Credit reports and credit checks
Credit checks form part of any credit application, including for an auto loan. Once you apply for the loan, the potential lender will perform a credit check to see how good you are at handling money.
So, what do they check?
Your personal information
A lender will check your name, address, any previous addresses, current and previous employers and your date of birth.
Employers are only usually listed if you used one in a previous credit application. Otherwise, your employer won’t usually be mentioned on your credit report.
Lenders will use this information to build a picture of you as a person and to verify the proof of address and ID you provided as part of the loan application.
Open credit lines
Lenders will also check how many credit cards you have and how much is outstanding. They will also check for personal loans, other auto loans, mortgages and any other types of credit you might use.
The lender wants to see how much of the credit you have available is in use which makes up your income to debt ratio. They will also want to see how much debt you have overall to help assess affordability.
Sometimes lenders want to see what credit you have had in the past and paid off. Not all lenders will check this but it can go to help paint a picture of you as a borrower.
For example, if you have numerous auto loans previously and all were paid off, that’s a sign that you’re a responsible borrower.
Almost all lenders will want to see your payment history. This is an important part of a credit check and lenders will be looking for any late payments, any missed payments and what proportion of your payments were paid on time.
Never missing a payment means you’re potentially a low risk borrower as you always pay on time. Any missed payments or frequently missed payments paints a different picture.
Lenders will also check for credit inquiries. These will be hard inquiries as the result of a credit application. Lots of hard inquiries in a short period of time may indicate identity theft or someone wanting to borrow a lot in a short period of time.
This will not benefit your application, which is why we always recommend only going for preapproval and applying for the loan you want rather than applying for lots at once in the hope you get one.
Finally, a lender will want to know if you have ever been bankrupt or whether you’re within bankruptcy proceedings. This will have a detrimental effect on any Cayuga auto loan application.
Once bankruptcy proceedings are complete, you can apply for a loan but not while those proceedings are underway.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!