When you apply for automotive financing, you'll be asked to complete a credit application. Be prepared to supply the following information:
- Your name
- Your Social Security number
- Your date of birth
- Your current and previous addresses and length of residence
- Your current and previous employers and length of employment
- Your occupation
- All sources of income
- Your total gross monthly income
- Any financial information on existing credit accounts (including numbers)
- Mortgage or rent information
- Name and address of friends
- Name and address of nearest relative
Your lender will obtain a copy of your credit report. As we discussed earlier, your credit rating will ultimately impact the type (or terms) of the loan you qualify for. Simply put, your credit rating is determined by your current and past credit obligations, and your ability (or lack thereof) to make your monthly payments in a timely fashion.
Its important to know you credit status prior to shopping for a vehicle. Most lenders use what is called the FICO score (a measure of you past credit history). The lower the score the higher the interest rate will be, ultimately raising your payment and decreasing your buying power.
Your credit report contains important information about what you currently pay on a monthly basis for existing credit accounts (such as loans and credit cards) as well as what you've paid for credit accounts in the past. Additionally, this report outlines data from public records. For example, if you've filed for bankruptcy in the past, this information will be presented on your credit report.
Your credit report will highlight information about each credit account you're obligated to pay, including the account number, the type and terms of the account, the credit limit, the most recent balance and the most recent payment. Each creditor provides comments about the account's current status, any past due information and any legal issues that might involve the account, including any collections procedures, if applicable, that were implemented to receive payment from you.
Depending on whether you've chosen direct lending or dealership financing, the process by which you qualify for an automotive loan is relatively similar. If you've chosen a direct lender, your application is submitted directly to the bank, credit union, finance company, or online provider, for immediate review. Then, a loan representative will process the application for qualification. If you choose to finance your vehicle through the dealership, the dealer will typically sell your contract to a specific assignee, such as a bank or finance company to determine their willingness to purchase the contract.
Either way, your application goes through a standard loan process that will weigh a variety of factors, including your income and expenses, your employment status, and your credit history. These factors are weighted and you are assigned a credit score, known as a FICO score.
This score, in association with your credit report, the information on your credit application and the terms of the vehicle sale, including any down payments, are all essential components in determining whether or not you qualify for automotive financing.