Buying a car is an exciting time in your life, especially as you compare features and pick out the model that is best suited for your lifestyle. If your credit score is low, you may end up with a higher interest rate on your auto loan. Check out these helpful tips to whip your credit into shape before you apply for the loan.
1. Check Your Credit Report
It’s important to know what’s on your credit report that may be causing the number to go down. The three major credit bureaus, TransUnion, Experian, and Equifax, will each produce a separate report and score, so review a report that includes information from all three of these agencies. Your credit report could contain errors or other issues that are causing your score to drop.
Under the Fair Credit Reporting Act, you can receive a free copy of your report every year, so visit AnnualCreditReport.com to get started. If you do find an error, you can file a dispute to get it removed, which should help your score to go up.
2. Stay On Top of Payments
Late payments can seriously impact your credit, so make sure you’re paying everything on time. Staying on top of deadlines and current with payment requirements is the best way to avoid delinquency that can cause your score to go down.
If you have a single late payment due to an oversight, you may be able to talk to the lender or creditor to see if they will forgive the mistake and remove it. You’re more likely to get a positive response if you have a history of making all your payments on time and they can see that this was a one-time mistake. If you have trouble remembering to make payments on time, consider setting up auto-pay to avoid late payments in the future.
3. Pay Down Your Debt
A major factor used in calculating your credit score is your debt-to-income ratio. If your debt amount is high, look for ways to pay it down to lessen the ratio, which can potentially help your score go up. Debt consolidation is one option, which allows you to make one monthly payment rather than paying down each debt individually. If you have debts with higher interest rates, such as credit cards, focus on paying those down first.
4. Maintain Low Balances
Another helpful tip to boost your credit score is to maintain low balances on all your open credit accounts. The amount of credit available to you versus the amount you’re using is called the credit utilization ratio. Those with high credit scores usually have low credit utilization ratios.
When a lender looks at your credit history, they will likely want to see a utilization ratio of 30% or lower. You can improve your ratio by keeping balances low on your credit cards and paying down debt. If you have a family member with good credit, becoming an authorized user on their account can also positively influence your ratio.
Use these tips to improve your credit score and potentially lower the interest rate on your auto loan. Then visit us at Rath Auto Resources to find the perfect vehicle and get a great deal.
Image via RathAuto.com
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