RV Financing Credit Score: What You Need to Know

RV Financing Credit Score

RV financing is a new industry for many people and can be difficult to understand. You need to make sure you have the right financing available and loans secured before you buy your RV. This blog post will guide you through some of the basics of RV financing, including things like how credit score affects your RV financing options and what loans are available.”.

Credit Score RV Loans

RVs are made to help you fill your life with grand adventures while you cruise in comfort.

They vary widely when it comes to style, design, amenities, and . . . price. Just like when looking for a car and needing an auto loan, looking for that new RV often leads to the world of RV financing. If you are ready to embark on your lifelong dream of RV living, read on for more information about the necessary RV financing credit score—even bad credit RV loans.

RV Interest Rates and Terms

Recreational vehicles are considered luxury items, and the maximum term is usually 15 years.

The shorter your RV loan terms, the lower your interest rate, just like any other personal loan. And, just like with any other loan, shorter terms mean larger monthly payments.

Oftentimes, the more you finance, the lower the interest rate, and of course your credit history greatly influences the rate and term available to you, be it because of your credit cards or any personal loan in your history.

RV interest rates are also different between the purchase of new RVs vs. used RVs, similar to the auto loans industry. While the lower interest rate and “new RV smell” are understandable temptations, paying a smaller purchase price for a used RV with a little higher loan interest rate may be the most financially sound option in the long run. Just like when you buy a new car, your RV depreciates significantly the minute you drive it off the lot, so it’s not the best idea to ask for high loan amounts that you’ll have to pay interest on.

There are also a lot of new RV owners who warn buyers about the “shakedown period.”

RVs are constructed well, but travel and use will determine how things are going to fall into place. The first year of an RVs active life of any recreational vehicle is spent more in the shop instead of on the road. If you purchase a used RV that is a couple of years old, those kinks are usually worked out and you may save money on the purchase and on repairs.

RV Financing Credit Scores

So we finally come to the big question: What kind of credit score do you need to obtain RV financing?

The answer is that it varies greatly.

The RV financing industry-standard ranges from about 660 to 700 FICO score, but there is a possibility your search for “RV financing with 650 credit score” can be fruitful because there is financing available for credit scores in the 500 to 600 range. So yes, your search for an “RV loan credit score 650” can be a reality and not just a dream.

At Southeast Financial, we look at your credit history and RV financing credit score as part of the loan application process, but we do not have a set minimum number in order for you to be approved. Our RV financing loan specialists understand that credit scores are not necessarily because of bad financial decisions but that life events have a great impact on your financial situation, and we do not look at our customers as a number. We also understand that RV financing may be a good way to help build that FICO score back up.

The bottom line is that just as with any loan when you are looking into RV financing, be it an RV financing with a 650 minimum credit score in your record or less, take some time to find the best fit for your specific needs, especially the monthly payments and without having to dip into your savings account.

This is also good advice when you are shopping for your RV. Do not buy the first thing you see and consider the pros and cons of paying the sticker price. Do your homework and talk to other RV owners, as they are your best resource.

How to Improve Your Credit Score and DTI

As we mentioned it before, when it comes to securing an RV loan or just better and shorter loan terms, your credit score plays crucial roles in determining your eligibility and the interest rates you may receive when you’re in the market for a loan that can get you that new travel trailer or motorhome.

However, a key part of your credit history is managing your debt-to-income ratio (DTI).

Here’s how you can improve both metrics to enhance your chances of financing your dream RV.

How to Improve Your Credit Score

1. Check Your Credit Report: Regularly review your credit report for inaccuracies or errors. You can request a free report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—once a year. Dispute any inaccuracies you find to ensure your score reflects your true creditworthiness.
2. Make Payments on Time: Your payment history accounts for a significant portion of your credit score, no matter the type of loan or credit. Set up reminders or automatic payments to ensure that all your bills—credit cards, loans, utilities—are paid on time.
3. Reduce Credit Card Balances: Aim to keep your credit utilization ratio (the amount of credit you’re using compared to your total available credit) below 30%. Paying down existing balances will not only improve your credit score but also lower your overall debt burden.
4. Avoid Opening New Credit Accounts: While it may be tempting to open new credit accounts to improve your overall credit limit, doing so can negatively impact your score in the short term. Instead, focus on managing your existing credit responsibly.
5. Keep Old Accounts Open: The length of your credit history also affects your score. Avoid closing old credit accounts from any bank, credit union, or whatever financial institution, even if you don’t use them often. They contribute positively to your overall credit profile.
6. Diversify Your Credit Types: A mix of credit or types—such as installment loans (like an auto loan) and revolving credit (like credit cards)—can positively influence your score. However, only take on new credit if necessary and manageable.

Understanding Debt-to-Income Ratio (DTI)

Your debt-to-income ratio (DTI) is a measure of how much of your monthly income goes toward paying debts. It is calculated by dividing your total monthly debt payments by your gross monthly income. Lenders typically prefer a DTI of 36% or lower, although some may allow up to 43% depending on other factors.

Example Calculation: If your monthly income is $4,000 and your monthly debt payments total $1,200 (including your potential RV loan payment), your DTI would be 30% ($1,200 ÷ $4,000 = 0.30 or 30%).

How to Improve Your DTI

1. Increase Your Income: Consider taking on additional work, such as freelance projects or a part-time job, to boost your monthly earnings. Even a modest increase can significantly improve your DTI.
2. Pay Down Existing Debt: Focus on paying down high-interest debts like credit cards or personal loans. Reducing your overall debt load will lower your DTI, making you a more attractive candidate for RV financing.
3. Refinance Existing Loans: If possible, refinance loans with high interest rates to lower monthly payments. This can help decrease your DTI while potentially saving you money in interest over time.
4. Avoid Taking on New Debt: Before applying for an RV loan, refrain from accumulating new debts. This will help maintain a low DTI and strengthen your financial standing with lenders.
5. Create a Budget: Implementing a budget can help you manage expenses more effectively, allowing you to allocate more funds toward debt repayment. This proactive approach can lead to quicker improvements in your DTI.

By focusing on improving your credit score and managing your debt-to-income ratio, you can enhance your chances of securing RV financing at favorable loan rates and loan terms. Taking these steps will not only help you qualify for a loan but may also lead to better interest rates, making your dream of owning an RV more achievable.

Credit Score RV Loans from Southeast Financial

When you are ready to get on the road contact us for more information and take the first steps to owning an RV you will be sure to enjoy! We offer competitive rates, fast approval decisions, and some of the lowest minimum loan amount requirements in the market.

RV Financing Credit Scores