Tips for Improving Credit Score to Get a Car Loan

 

A credit score is a three-digital number used by lenders to determine the likelihood that you’ll repay the money you borrow. The score is determined by a variety of factors including your past payment history, how much money you already owe to other lenders, and how much of your available credit you’re using. When you want to buy a car with a car loan, you want to have the highest credit score possible. The higher your credit score, the better your interest rate and repayment terms.

Here are a few tips for improving your credit score:

Reduce Your Debt

One factor used in the calculation of your credit score is how much credit you have available to you versus the amount of credit you’re using. To improve your credit score and improve your chances of getting approved for a vehicle loan, pay down your credit card balances and any other revolving debt balance you have. You want to keep how much you owe at 30% or lower of your available balance.

Don’t Close Accounts With Good Repayment Records

When you pay off credit cards that you have had a strong repayment history on for years, don’t close the account or cancel the credit card. You want your good credit history to remain on your credit report as long as possible, and if you close the account it will disappear from your record in about seven years. Closing accounts can further reduce your credit score because it reduces the amount of available credit you have; making it seem like your debt in comparison to your available credit.

Pay Bills on Time

Always pay your bills on or before the due date to avoid late fees and to avoid a negative notation on your credit report. Repeated late payments will cause your credit score to decrease, while making your payments on time over time will increase your credit score.

 

 

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