Credit Score and Locked Credit Effects on Loan Apps

Credit doesn't typically have a significant impact on the interest rate associated with an aircraft loan, although it could potentially be a gating issue. In our experience, the biggest way someone's credit score affects the ability to secure a loan is if it's below 700. Broadly speaking, credit score parameters fall into one of four buckets:

  • Under 680
  • 680 to 700
  • 700 to 730
  • And over 730

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

In reality, a 730 score is as good as an 800 score and vice versa. 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 C's of Credit: 

* CapacityWhat 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? 

* CharacterWill you repay the loan? Have you used credit before? Do you pay your bills on time? 

* CollateralIf you fail to repay the loan, is there something of value that you agree to forfeit? 

* Capital (accumulation)What are you 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 rememberif 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 though), the credit report doesn't include a credit score. Your bank, your credit card vendor, even identity protection companies like Lifelock can provide you a free credit score.

Great advice. Great rates. From helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.

©2021 Adam Meredith

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