If your credit score is 705, you are right in the middle. As of 2021, the average FICO score for a consumer in the United States is 714, according to Experian, with a score between 670 and 739 generally regarded as good.
An average credit score of 705, as determined by most lenders, indicates that you typically pay your bills on time. This post will go into greater detail about what a 705 credit score means when it comes to loan applications and what you can do to raise it.
Absolutely, a 705 credit score is sufficient to qualify for a car loan! While it won’t guarantee you the lowest interest rates, it opens the door to various financing options. Let’s delve deeper into the specifics and explore what you can expect with a 705 credit score in the car loan arena.
Navigating the Car Loan Landscape with a 705 Credit Score
A 705 credit score falls within the “good” range, indicating responsible credit management and a positive track record of repayments. This score positions you favorably for car loan approval, but it’s crucial to understand that your interest rate will likely be higher compared to borrowers with exceptional credit scores.
Interest Rate Expectations
According to Experian, the average used-car score was 684. Borrowers with a 705 credit score can generally expect to get an annual percentage rate (APR) of 7.01% for a new-car loan and 9.73% on a used-car loan. So while a 705 score won’t be a barrier to getting a car loan, you likely won’t get the lowest rates.
Factors Influencing Interest Rates
Several factors beyond your credit score can influence your car loan interest rate. These include:
- Loan term: Longer loan terms typically come with higher interest rates.
- Down payment: A larger down payment can lower your interest rate.
- Debt-to-income ratio (DTI): A lower DTI indicates a better ability to repay the loan, potentially leading to a lower interest rate.
- Lender: Different lenders offer varying interest rates based on their risk assessment and target market.
Optimizing Your Car Loan Experience
To secure the best possible car loan terms with a 705 credit score, consider these strategies:
- Shop around: Compare offers from multiple lenders to find the most competitive rates.
- Improve your credit score: Even a small increase in your credit score can lead to a lower interest rate.
- Make a larger down payment: This reduces the loan amount and demonstrates your financial commitment.
- Consider a shorter loan term: While the monthly payments might be higher, you’ll pay less interest overall.
Additional Considerations
- Pre-approval: Getting pre-approved for a car loan can strengthen your bargaining position and streamline the car-buying process.
- Used car vs. new car: Used cars typically come with lower interest rates than new cars.
- Private party vs. dealership: Private party car purchases may offer lower prices, but dealerships often have more flexible financing options.
A 705 credit score opens the door to car loan opportunities, but understanding the factors influencing interest rates and implementing strategies to optimize your terms can significantly impact your financial outcome. By carefully considering these aspects, you can secure a car loan that aligns with your budget and financial goals.
Can I get a mortgage with an 705 credit score?
Given your 705 credit score, you should have no problem getting approved for a mortgage, provided that your income, employment status, and assets are sufficient to warrant the loan. A score of 620 is needed for conforming mortgages, or conventional loans that adhere to Fannie Mae or Freddie Mac requirements, while a 580 is needed for FHA mortgages with small down payments. Your score puts you comfortably over both thresholds. Having said that, there are a few things to keep in mind.
For one thing, you’re unlikely to qualify for a lender’s best mortgage rates. Lenders typically reserve their top rates for borrowers with very good or exceptional credit scores. However, with a 705 credit score, you should qualify for rates on-par with national averages.
Additionally, even though your score makes you eligible for a mortgage, it’s crucial to understand that the stronger the rest of your qualifications are generally expected to be, the lower your score is. For instance, in accordance with Fannie Mae’s most recent lending guidelines, you are eligible for a mortgage with a debt-to-income ratio (DTI) as high as 45% and a standard 20%2020% down payment if your credit score is above 720. If you don’t, your DTI is capped at 36%.
Can I get an auto loan with an 705 credit score?
Absolutely. Your 705 credit score will qualify you for an auto loan, assuming your income justifies it. But it’s crucial to understand that the interest rate you receive can vary significantly depending on your credit score. And this is especially true in auto lending.
According to MyFICO, as of November 2022, the average APR on a 60-month new auto loan for someone with a FICO Score of 720 or higher is 5.64%. With a score in the 690-719 range, it’s 6.83%. And for a borrower with a score in the 660-689 tier, the average APR is 9.19%. For context, this means on a $40,000 new car loan, someone with a 730 would pay about $4,000 less in interest than a borrower with a 680, even though the scores are both in the “good credit” category.
It’s also important to note that, even for borrowers with identical credit scores, interest rates can differ dramatically between lenders. So, if you’re buying a home or car, it’s important to shop around for the best loan terms. In fact, the FICO credit score model is designed to encourage rate shopping. For the purpose of credit scoring, any inquiries for the same kind of loan on your credit reports made within a short period of time (typically two weeks) will be combined into one inquiry. Therefore, it doesn’t hurt your credit score to apply at multiple lenders.
How To Raise Your Credit Score When Financing A Car
FAQ
Is 705 a good credit score for a car loan?
What is the minimum credit score for car finance?
What is the lowest credit score to buy a vehicle?
What kind of car loan rate can I get with a 700 credit score?
|
Credit score
|
Average APR, new car
|
Average APR, used car
|
|
Superprime: 781-850.
|
5.64%.
|
7.66%.
|
|
Prime: 661-780.
|
7.01%.
|
9.73%.
|
|
Nonprime: 601-660.
|
9.60%.
|
14.12%.
|
|
Subprime: 501-600.
|
12.28%.
|
18.89%.
|
Can you get a car loan with a 705 credit score?
If you’re planning big-ticket purchases or a balance transfer that will take months to pay down, compare credit cards with 0% introductory APR offers. You should be able to get approved for a decent car loan with a 705 credit score, considering that more than 60% of all auto loans go to people with credit scores below 740.
Is 705 a good credit score?
A 705 credit score is a good credit score. The good-credit range includes scores of 700 to 749, while an excellent credit score is 750 to 850, and people with scores this high are in a good position to qualify for the best possible mortgages, auto loans and credit cards, among other things. Credit Rating: 705 is a good credit score.
How much does a 705 FICO score affect your credit score?
Credit mix accounts for about 10% of your credit score. 42% Individuals with a 705 FICO ® Score have credit portfolios that include auto loan and 29% have a mortgage loan. Public records such as bankruptcies do not appear in every credit report, so these entries cannot be compared to other score influences in percentage terms.
Can you get a student loan with a 705 credit score?
Student loans are some of the easiest loans to get with a 705 credit score, seeing as more than 70% of them are given to applicants with a credit score below 740. A new degree may also make it easier to repay the loan if it leads to more income.