If you’re looking for a new car, the odds are good that you’ve considered applying for financing rather than buying it outright. There are loads of great reasons to get your car on finance, beginning with the difficulty of finding several thousand dollars at once, and ending with the nice boost your credit score receives for successfully buying a car through a finance plan.
But before you finance your car it’s a good idea to give your credit a boost so you get the best possible deal. Here are our top tips for boosting your credit ahead of getting car financing.
Check Your Credit Score
First things first, it’s important to know what your credit score is before applying for a car loan. With sites like Equifax, TransUnion, and Experian offering you a free 12 month credit report, this couldn’t be easier, and there’s no need to pay for it.
Pay On Time By Setting Up Reminders
Once you have a clear idea of your credit situation, make sure you are making any repayments on time every month. Late payments have a negative effect on your FICO Scores, even if they’re only a few days late. Setting up regular payments for everything is one of the easiest and most effective ways to make a positive impact on your score. Most creditors will allow you to make automatic payments on a set date, while a lot of banks offer payment reminders through their digital banking portals. You can also set up your own reminders using a simple calendar app, which alerts you a couple of days before each payment is due.
Reduce Your Debt
If you are setting up automatic payments through your creditor, bear in mind it will only take the minimum amount required. It’s a good idea to pay more, as this reduces the amount of interest you pay, and clears your debt faster. Try to reduce your debt as much as possible before applying for new credit.
This is easier said than done, but it will have a huge positive impact on your overall score. Your credit report provides you with a full list of everyone you owe, allowing you to come up with a payment plan to clear things as quickly and efficiently as possible. It’s worth checking which accounts you are paying higher interest rates on and paying off those debts first.
The most effective way to reduce your debt is to pay it off; moving it around may help if you can get a 0% interest transfer deal, but it’s not always the best option.
Don’t Ignore The Issue
If you’re struggling to meet repayments or cover your debts, don’t ignore the issue. Get in touch with your creditors and arrange a repayment plan, or contact a registered debt management counselor. In the short term this won’t help rebuild your credit score, but in the long-run, it’s the only way to get your debts under control. Ignoring them will only cause any negative aspects of your score to grow worse.
Following these simple tips and spending a couple of months giving your score a boost before applying for car financing will increase your chances of acceptance and get the best deal on your new vehicle.
Photo by 401(K) 2013 | Licensed under cc BY-SA 2.0
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