When you buy big-ticket items like a vehicle, it can be difficult to pay in cash. This is why so many people use financing and rely on their credit scores to help them get a good deal. But what if your credit score is an obstacle rather than a help? Here are some simple ways to improve your credit score that can put you in position to get approved for a car loan.
Easy Credit Repair to Improve Your Score
Credit repair doesn’t need to be difficult or expensive. Some of the simplest ways to improve your credit score are free, and they don’t take a lot of time. Here are five easy steps you can take to start on the road to credit repair:
- Pay your bills on time – This is one of the easiest ways to improve your credit score, and all it takes is a little budgeting on your end. The more bills you can pay on time, and for a longer period of time, the better. Payment history makes up 35% of your credit score, making it the most important factor. Utility bills don’t typically get reported on your credit reports, but you can boost your credit score by making your utility bills work for you.
- Remove errors from your credit reports – It’s important to monitor your credit reports and credit score. When you routinely check your credit reports, you have a better chance of catching errors that could be dragging down your credit score. Items such as improper reporting, poor accounts that haven't fallen off in the proper amount of time, or collection accounts that you’ve paid off that aren’t marked as paid can all bring down your credit score. Disputing these issues to the reporting credit bureaus for removal can positively impact your credit score.
- Pay off debt – If you carry high credit card balances or a lot of debt in collection accounts, these things are weighing down your credit score. In order for your score to rise, you need to get rid of some of these things. Debt can seem unbeatable, but if you chip at it little by little, you can see improvement. When it comes to debt that’s in collections, choose the smallest, most manageable amounts and pay them off ASAP. When it comes to credit card balances, the rule of thumb is that your credit score is negatively impacted when your credit card balances account for over 30% of your credit card limits. Work to get under this threshold by only putting things on a credit card that you can afford to pay in cash, and paying off your credit card bills monthly. If you decide to pay off your credit cards, don’t close your accounts; the longer your credit history, the better.
- Balance your credit accounts – Credit is a balancing act. You need to maintain balance in how many accounts you have open as well as what type of credit accounts you have. There are two main types of credit accounts: installment credit, such as auto loans and mortgages, and revolving credit, such as credit cards and charge accounts. Your credit mix accounts for 10% of your FICO credit score. If you only have one type of credit, applying for the other can also help boost your diversity and improve your score.
- Get a car loan – If you need a vehicle and are looking to improve your credit, an auto loan could be just the ticket. Even if you have bad credit now, getting a car loan through a subprime lender gives you the opportunity to add a new line of installment credit and build a long-term positive payment history. Talk about a win-win situation.
Wondering How to Get Started with a Bad Credit Car Loan?
If you need a bad credit auto loan, you’re in luck. Auto Credit Express works with a nationwide network of special finance dealerships that can get you a car loan. To get on the path to better credit, simply fill out our free, no-obligation car loan request form. After that, we'll get to work matching you with a local dealer!