GMAC — once known as the General Motors Acceptance Corporation, the financing arm for GM — announced recently some changes that may impact whether you can finance your next car through them or not. In a bid to counter the lack of stability in the financial and credit markets, GMAC is now requiring that all credit applicants have a FICO score of at least 700 in order to qualify for an auto loan.
The move by GMAC comes just a few months after the financing arm of GM (51% owned by Cerberus) said that they were curtailing its automotive leasing business. GMAC, like many automotive financing arms, has been hit hard by the rapid devaluation of big trucks, SUVs, and large cars, a move which has contributed to the financing company’s steep losses this year.
You Can Qualify For A Car Loan
For consumers who still want to finance a new car purchase, the news isn’t necessarily bad, especially for the 75% or so of people who meet the minimum threshold. For everyone else there are some steps that can be taken which can still secure a car loan for them. These include:
Raise Your Credit Score — Unless you must buy right now, you might be better off waiting to purchase a new car until after you work on raising your credit score. Obtain copies of your credit reports and find out what may have caused your score to drop. If the problem is easy to correct — let’s say a mistake is found on your report — your score could be adjusted upwards in as little as thirty days. Otherwise, if you’re behind on loan payments, catch up on those immediately — it’ll take longer to raise your score, but in the end you’ll be glad that you did as your interest rate will decrease.
Arrange Your Own Financing — Banks and credit unions may want to finance your purchase too. Their requirements might be different, spelling the difference between you getting a car now or waiting until later. Remember, the lower your credit score the higher your interest rate will be. Is it worth getting the easier approval only to pay more later?
GMAC isn’t the only automotive financing arm raising their requirements, though they are the most visible one given their sheer size. Despite what you may be hearing on the news, credit hasn’t dried up completely as it is still very much available to people who have a high credit score.
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