How Credit Scores Impact Trailer Financing Approval and Terms

Having the right equipment is essential for success in commercial trucking. However, obtaining assets, such as trailers, can be quite an investment. If you are going to require financing for your purchase, it is important to understand the significance of the credit score. 

This article explores how credit scores impact trailer financing approval and terms. 

The Importance of Credit Scores

Credit scores reflect the creditworthiness of the borrower using a numerical system. Lenders use them to assess their risk when deciding to lend money. 

The lower the credit score, the greater the risk. After all, a low score is often associated with a high amount of debt, recently defaulted accounts, and the like. Lenders may want to take a closer look before agreeing to finance a trailer for someone with poor credit. 

A high credit score, on the other hand, indicates a lower risk of default if financed. Individuals and businesses that prove to be creditworthy are more likely to be approved for loans. They are also more likely to receive favorable terms. 

How Credit Scores Affect Trailer Financing

Here is a closer look at just how impactful credit scores are when it comes to trailer financing. 

Loan Approval or Denial

Your credit score can mean the difference between getting approved for a loan — or getting denied. Lenders are more willing to extend credit to those with higher credit scores and a strong credit history. 

Low credit scores can make it tough to secure a loan for a trailer through traditional financing, especially a loan with desirable terms. 

Interest Rates 

When determining the interest rate for a loan, there is a huge emphasis placed on the borrower’s credit score. The better the credit score, the better the interest rate.

Borrowers with poor credit may be approved but often for a loan with a very high interest rate. 

Terms of the Loan

The terms of a loan when it comes to trailer financing may or may not be favorable. And it usually comes down to your credit score. Terms include the size of the loan, the repayment period, the down payment amount required, and so forth. 

Those with better credit often get approved for larger loans with little to no down payment. Those with not-so-great credit scores may be required to put more money down and may not be approved for as big of a loan. 

The Need for Collateral

Depending on the credit score, some lenders may require collateral to be used to secure a trailer loan. For instance, personal assets or business property may be used to show good faith if purchasing a trailer with a low credit score. 

How to Improve Your Credit Score

The good news is that your credit score is not set in stone. If you have the time and don’t need to finance your trailer right away, then it is possible to improve your score. 

• Always be on time with payments on all of your accounts. 
• Reduce your debt by consolidating or paying down balances. 
• Monitor your credit report regularly and report any errors or inaccurate information. 
• Don’t apply for new credit unless it is necessary. 

Seek Alternative Financing

If you want a loan to purchase your trailer but don’t have the credit score to make it happen, then seek alternative financing. At 10-4 Financing, we help those with poor credit scores obtain the financing they need to secure the equipment for their business, including trailers. 

Apply today.