More than a number

In our experience at AOPA Aviation Finance, someone’s credit score starts to affect their ability to secure a loan if it’s below 700. Broadly speaking, credit score parameters fall into one of four buckets: under 680, 680 to 699, 700 to 729, and 730 and over.

Depending upon which bucket your score falls into, there are two ways the credit score will affect the loan: your interest rate and/or your loan structure.

In practice, a 730 score is as good as an 800 score. It’s a truism not widely discussed. What really matters is a credit score below 680. Below that, deals are difficult to secure.

Your credit score is one part of the four Cs of credit:

• Capacity. What is your ability to repay the loan? Do you have a job or another income source? Have you held your job for a length of time? Do you have other debts?
• Character. Will you repay the loan? Have you used credit before? Do you pay your bills on time?
• Collateral. If you fail to repay the loan, do you agree to forfeit something of value?
• Capital (accumulation). What is your net worth? Do you have other assets, such as a savings account, real estate, or share certificates you could use to repay the debt? How liquid are those assets?

Freezing or locking your credit is a reliable way to prevent identity theft. Both have been offered by credit reporting companies for years, and millions of people take advantage of the strategy. Just remember, doing either adds time to the application process. Lenders won’t be able to pull your credit until you’ve unlocked or unfrozen your credit. Our advice is to unlock your credit well before you apply as it may take longer than anticipated for all three credit reporting agencies to comply. And remember—if you’ve locked your credit, you have to go to all three credit agencies to unlock it.

While everybody is entitled to one free credit report annually (be wary of scammers, however), the credit report doesn’t include a credit score. Your bank, your credit card vendor, and even identity protection companies like LifeLock can provide you a free credit score.

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