Mortgages and Car Loans

Your credit score really comes into play when you’re in the market for a home or new vehicle. Since the 1980s, lenders have become more sophisticated about using credit scores to evaluate borrowers. This means both good and bad things for you.

The good news is that an increasingly national lending market means that there are programs for people with even checkered credit histories to get home or car loans. Of course, if you have poor credit, you’re going to pay a lot in interest and fees.

The bad news is that lenders are more demanding than ever about personal information from borrowers and—in a cruel irony—the lending process has become a lot less personal than it used to be. Even local banks use mathematical formulas to decide whether they will lend money…and at what cost.

The terms and conditions offered by secured lenders—banks, credit unions and finance companies who lend on things like car and home purchases—vary widely. In this chapter, we’ll consider the details.

As in any market, some lenders offer better rates than others. Even as lenders have become more scientific, the formulas they use can be quite different. Different lenders use different credit score ranges when determining whether to lend to you…and which interest rate to offer. If your credit score is 718, you may be offered the best rate by one company and the second-best by another.

There are also a lot of variables to consider, including—and extending far beyond—the interest rate.

Next: Home Mortgage Loans