If you're not happy with the type of auto loan you qualify for due to credit issues, it's time to do something about it! There are many steps you can take right now to help improve your credit score so you can qualify for better loan terms the next time you need a car.
How Credit Repair Works
Credit repair doesn't have to be difficult or expensive. In fact, some of the best things you can do to begin improving your credit don't cost you anything.
Although there's more than one credit scoring model in the U.S., most lenders use your FICO score when considering you for financing. Your FICO credit score is made up of five different factors: payment history, amounts owed, length of credit history, new credit, and credit mix.
Each factor makes up a certain percentage of your credit score. If you can improve upon the areas of your life that affect these factors, you should be able to begin to improve your credit score over time.
Remember, credit scores fluctuate and can change a few points here and there on a daily basis. And while lasting credit repair is often the result of enduring changes in personal habits, these changes may not take as much work as you anticipate.
Easy Steps toward Credit Repair
The first step toward lasting credit repair is a common thread among people who enjoy good credit: pay your bills on time. When you pay all of your bills on or before the due date, you establish a positive payment history.
Payment history is the largest factor that makes up your credit score, accounting for 35% of it. It's also something that lenders look at when you apply for an auto loan. Having a spotty payment history could lead lenders to believe that you're not responsible with your finances. This may result in you being turned down, or other adverse effects such as a higher interest rate if you do qualify.
The second step toward repairing your credit is to stop overspending.
If you have credit cards, a good rule of thumb is to only put on them what you can afford to pay for in cash. This way, when the bill comes due, you can pay off the entire balance, rather than the minimum amount. If you continually pay only the minimum amount due on credit cards or store charge accounts, you accrue hefty interest fees which could lead to unmanageable debt.
The reason this can help your credit score is that lenders typically look more favorably on people whose credit utilization ratio stays under 30%. A credit utilization ratio is how much credit you're using compared to what's available. To find out your credit utilization ratio, add together all your credit card balances and divide that by your total credit card limits.
You can also clean up your credit reports to help you improve your credit score. Our trusted partner. Our trusted partner can help you kick start your credit repair if you need assistance.
Bad Credit Auto Loans Help Repair Credit
Remember that car loan with the rates and terms you weren't happy with? Well, that bad credit auto loan might be just the key to speeding up the journey toward a loan you love. This is because a car loan is a wonderful opportunity improve your credit score.
It gives you an account to make timely payments on for an extended period of time. Plus, it means that the next time you need an auto loan, lenders can see that you've recently handled one responsibly. This could result in better loan terms.
Additionally, getting a bad credit car loan adds a new line of installment credit to your credit mix. New credit and credit mix – the mix of installment loan and revolving credit you have – each make up 10% of your credit score.
Get an Auto Loan
Even if you're struggling with credit issues, there are lenders available that can get you the auto loan you're looking for. These lenders, called subprime lenders, offer car loans through special finance dealerships and help people who wouldn't otherwise qualify for one.
If you're not sure which dealerships in your area work with subprime lenders (not all of them do), Auto Credit Express wants to help. We've been matching credit-challenged consumers to local dealers with subprime lending partners for over 20 years. This cuts down on the time and hassle you could spend driving around looking for financing.
To get started toward a credit-building auto loan now, fill out our car loan request form. After you do, we'll get to work finding a dealership near you to connect you with.
