Why do you need to improve your credit to get a car loan? You don't have to take extra steps before you apply: you can both upgrade your credit and get another vehicle at the same time! An auto loan is a great way to improve your credit score, but since you want to get the most out of your next car loan, we have some tips to help you build your credit score!
Tips for Building Your Credit Score
Though an auto loan is a wonderful way to build your credit, there are many things you can do to raise your credit score before you start shopping for your next vehicle. And they're not things that are difficult to achieve – nothing to buy, nothing to sign up for (unless you choose to), just simple steps to take.
- Pay your bills on time, every time. The biggest factor in determining your credit score is payment history. How you pay your bills shows lenders how you handle credit on a day-to-day basis, and the more efficiently you do so, the more your credit score can improve. This goes hand in hand with length of credit history, which tells a lender how long you've been using credit for. The longer you maintain a good payment record, the better.
- Rental payments can improve your credit score. Signing up with a payment reporting service allows the national credit bureaus to see more of what you're paying on a regular basis. This can help you to take advantage of rent and utility bill payments to raise your credit score. These payments aren't usually automatically reported. You can also take advantage of payments you make for digital or streaming services by signing up for a reporting program like Experian Boost.
- You can raise up your credit score by becoming an authorized user. If you have a friend or family member with great credit, a long-standing credit card, and a great payment record on it, signing on as an authorized user can give your credit score a lift. This process allows you to attach yourself to someone's credit card. The bonus that makes this worth it is that you get their good credit record associated with the card on your credit reports after becoming an authorized user.
- Clean up your credit reports. Negative marks, collection accounts, and past repossessions or bankruptcies can stick around on your credit reports for seven years or more. These blemishes can bring down your credit score, even if they're reported in error. It's a good idea to pay careful attention to your credit reports and make sure that there's no lingering information that no longer applies or should've fallen off. You can do this by looking over your credit reports and contacting the reporting bureau if there's something amiss. If you don't have time to spend yourself, you can always use a credit repair company to help.
Why Credit Matters for Car Loans
Credit scores determine a lot of your buying power in the world, including when it comes to car loans. It's true that a higher credit score equals a better chance at a higher loan amount, lower interest rate, and a larger selection of vehicles to choose from, but this doesn't mean that a good credit score is the only thing that qualifies you for lending.
If you haven't done so, it's a good idea to get your credit score and reports before you start applying for an auto loan. You can request your reports by visiting www.annualcreditreport.com. Now through April 2021, you can get a free copy of your credit reports from all three national credit bureaus through this government-run resource.
Your credit score can be obtained in a variety of different ways, such as through your credit card provider or by paying a small fee through the credit bureaus.
Once you get your information, know what you're looking at. Your credit score tells you which credit tier you're likely to fall into, and allows you to research the kinds of interest rates and loan terms people in similar situations get. This gives you a leg up on knowing the average, so that you can determine whether or not a lender is offering you a fair deal.
You also get the chance to see what's being reported on your credit reports, and know what areas you need to work on to bring that score up.
If you have credit challenges, there are specific lenders available to get you the financing you need, called subprime lenders. It's important that you know your credit situation and where you're starting from, though, or you won't know you need to seek this type of lender.
Subprime Lenders Are Different
Subprime lenders know that credit scores are only one part of a bad credit consumer, so they don't base their lending decisions on them alone. Instead, they look at your overall financial health and stability, including income, employment, residential stability, and your willingness to invest in yourself and the loan with a down payment.
These lenders use these factors to see that you have the ability, stability, and willingness to take on a car loan. However, they aren't found around every corner. Sometimes, it takes extra time to find a lender if you don't know where to look. That's where we can help, though.
Here at Drivers Lane, we've gathered a nationwide network of special finance dealerships that are signed up with subprime lenders that can assist people who need bad credit auto loans. Save yourself the hassle of looking all over town for the right lender, and start here with us instead.
We want to match you to a local dealer for the car financing you need. Simply fill out our fast, free, and no-obligation auto loan request form to get started today!