Subpar credit may mean lousy loan deal

Dear Terry,
About three months from now, I will be trying to purchase my first vehicle. I have had some credit problems in the past, but through credit education, I've managed to raise my score from a 420 to a 547 in less than a year.

In three months, I will have three major accounts paid off equaling around $8,000. What type of scores do lending services look for when making loans for vehicles? How much will paying these accounts off affect my credit score?
-- Travis

Dear Travis,
Paying down debt, but not necessarily closing all accounts, will definitely help raise your credit score. But depending on what your past credit problems were -- a repossession, debts sent to collection agencies, etc. -- that will only go so far.

Because of the subprime mortgage problem, auto loan lenders have tightened their standards for making loans at prime rates. To get some of the best deals, you'll need a credit score in the 700 range, if not higher. With a credit score in the mid-600s, you'll almost certainly find a willing lender, but the interest rate could be 10 percent or higher.

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