Your credit score is important to maintain if you want to access quality loans, services, and even employment and housing. In short, a credit score is a number that determines financial trustworthiness, or your ability to pay back on services and products offered. The higher your score is, the more confidence borrowers have that you can pay them back.
Borrowers look at your credit score when evaluating your application for financing a new vehicle. Although you can get approved with a medium or low credit score, a higher score will help determine the quality of the loan, such as the amount borrowed and APR (interest rate). So, in a nutshell, a high score can save you a lot of money.
How long it takes to improve your credit will depend on your unique situation, including how much debt you have. Generally, it can take a few months to several years to improve your credit. Therefore, it’s best to understand what you can do today to help optimize your score quickly. You may be surprised that you don’t have to do a lot or spend tons of money to accomplish this.
Take a look at four major ways you can improve your credit score today to finance the vehicle you want.
Stay up to date on bills and payments
You don’t want a long history of late payments. This will easily lower your credit score and alert borrowers that they may struggle to get anything from you. Make sure you don’t miss payments beyond the 29-day mark.
To avoid missing payments, you can set up automatic payments, so long as you make sure they don’t overdraft. If you run into financial issues and can’t make a payment, contact your borrower to discuss options. Don’t avoid them. Sometimes they may allow you to change your due date if it helps you pay on time.
Don’t apply for new accounts frequently
Even though it’s important to apply for credit accounts (to build up your credit file), you don’t want to do this frequently. Why? Each time you apply for credit or a loan, it leads to a credit inquiry, which harms your score. This is especially important if you create a lot of applications in a short period of time, which could indicate financial difficulty.
The one exception is if you’re seeking an auto loan since it makes sense to create multiple applications and the process is usually done in a short time frame (14-45 days). Credit scoring companies will view this as you shopping for the best deal and treat it as one inquiry.
Eliminate debt and keep balances low
Despite being current on payments, if you still have high balances on them, that can result in a high credit utilization rate (how much credit card debt you have compared to your overall limit), and it can harm your score. Try to keep your utilization rate at less than 30%. When paying debt, focus on eliminating maxed-out cards and high balances first.
Dispute errors on your credit reports
If you haven’t checked your credit report in a while, do so before financing your next vehicle. Check with major reporting bureaus, such as Experian, Equifax and TransUnion, and see whether there are any errors that need correction. Taking care of this can instantly raise your score.
Bonus credit score tip
Another consideration to make involves holding on to credit cards that you no longer use. It may seem unnecessary, but holding on to them can improve your credit utilization rate. This is a good idea if you’ve had the account for years since it will positively affect your credit history age as well.
Find excellent financing options
No matter what your credit score is, if you’re ready for your next vehicle, stop by Auto Market of Florida. We work with customers with all credit scores, helping them find the right vehicle that fits their financial situation.
With competitive pricing and knowledgeable staff, we’ll work with you to find a financing option that’ll not only allow you to obtain the car you need but also help you rebuild your credit.
Check out our online inventory to see a robust sample of quality vehicles within your reach, no matter your credit score.