If you are in the market for a new car and you plan to finance the deal, then you probably know that a number of financing companies who work with the car manufacturers offer zero percent financing for the duration of the loan. Interest free financing is like money in the bank: you pay principle only while incurring no interest charges. Though zero percent consumer financing is available, the advertising fine print stipulates that this offer is only good for qualified buyers. Dig deeper and you learn that means people who have good credit.
Credit Scores
Before we look at what credit score is required to get 0% consumer financing, you need to understand what goes into your score in the first place. The Fair Isaac Corporation (MyFico.com), a business who sets the standard for scoring consumers creditworthiness, offers details about what goes into a credit score.
Your credit score consists of five components: payment history, amounts owed, length of credit history, new credit, and types of credit used. Certain components are more important than others, but collectively they determine your score. That score helps lenders decide whether to extend credit to you and for what terms (interest rate, down payment and length of loan).
The three credit reporting bureaus--Equifax, Experian and Trans Union--base their scores on Fair Isaac Corporation data, though there are slight variations in the way they calculate and arrive at these scores. Obtain your latest credit score from one or more of the credit reporting bureaus to determine where you stand.
Lenders
Banks, credit unions and other lenders offer consumer loans with varying interest rates. When it comes to car loans, the car manufacturer typically offers a loan through their consumer financing arm. For example, Ford Credit finances purchases of many new Ford, Lincoln and Mercury models. Similar arrangements exist throughout the industry.
Required Score
The base credit score that lenders require to offer you zero percent financing is not exact and fluctuates. Edmunds.com, a consumer site designed to help buyers get a fair deal on their new or used car purchases, identified Tier 1 borrowers (those with top credit) as having a credit score of 720 or above.
The required score can fluctuate as lenders tighten lending requirements when the economy is in the recession or loosens them during an economic boom. Contact your lender directly to learn what their current requirements are for you to receive zero percent consumer financing for your new car loan. Consider taking the cash rebate instead of the loan deal if the money offered is generous.
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