Credit References for Car Loans in Georgetown?

Credit References for Car Loans in Georgetown?

Posted on July 26, 2021

It’s customer question time again, this time it’s a relatively simple one. ‘What’s a credit references for car loans and why do I need one when applying?’ As our Georgetown auto loans team handled the question, we asked them to help write this blog post for the benefit of everyone.

What are Credit References for Car Loans?

A credit reference is another term for checking your credit report. It’s a method of using an independent third party to verify your auto loan application to check you’re telling the truth.

It sounds harsh but it’s true. A lender is considering loaning you a large sum of money so they need to be sure you have the ability to repay it. Part of that comes down to being financially able to repay the loan and part down to how you typically handle debt.

While you will provide proof of income as part of your application, independent third party verification of how you handle debt is required for that second part.

There are other types of credit reference, such as proof from another lender of how you handle debt, proof of having paid your mortgage or previous auto loans and other paperwork.

If you have a financial adviser or broker, they can also be a credit reference but not everyone has their own broker!

Credit reference and credit reports

So, your credit report is only one type of credit reference but it’s the most common. It shows a lot about your financial history, including how you repay debt, how you handle money and lots of other useful information.

A lender needs to know how you handle money, whether you always pay on time, whether you have ever been bankrupt or mishandled debt and other stuff too.

The idea is to build a picture of you as a financial risk. Lending is all about balancing risk. The lower the risk you are perceived to be, the more likely you are to qualify for the loan and the lower rate you’ll get.

The higher the risk you are perceived to be, the more carefully a lender will check your application and the higher the interest rate will be.

A lender will check for:

• Your payment history to check for missed payments
• Your debt to income ratio to make sure you can afford the loan
• To check for bankruptcies or consumer proposals
• The overall financial picture of you as a user of credit

Checking your credit report in Georgetown

This is why we recommend checking your credit report regularly. It forms an integral part of the auto loan application process. It’s one of the few ways a lender can really check to see whether you’re a good risk or not.

Alongside your documentation, your credit report is the one thing lenders can rely on to tell the truth and be as unbiased as possible. Keep your credit report in good order and you should ace any credit check!

When you’re ready for a car lease or loan, get in touch with the Georgetown auto loan experts at Northway Ford for great deals on auto finance.

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