Fixing Your Credit to Buy a Car
When you are looking to buy a car, having bad credit can be a problem. It's not impossible but it can be difficult. If you realize that car dealers make a large percentage of their profit from the financing or credit side of their business then you are understand why they are prepared to make a deal work if there is anyway to make it happen. Particularly, when you take into account the extra fee they get from the financing company.
In order to strengthen your position and make a better deal, you should have the best credit possible. This way you don't have to accept just any deal offered.
First make sure you know what your credit score is and why it is that figure. There is bad credit and then there is seriously bad credit. If you have only been late on a credit card payment, that is not the same thing as having declared bankruptcy. Your credit history report shows all the details of your credit cards loans, mortgages, car loans and leases. These are so detailed that it shows any missed or late payments, as well as how much and to whom. The report will also show any outstanding balances and details on inquiries made by other lenders.
Dealers, however, don't have the time to read your credit report. Instead, they go by your credit score or FICO score. This score represents your entire history and condenses into an easily recognized figure. It will be a figure between 300 - 850.
How does this figure affect you? Well if you have a score that is above 700, you are considered to be a good bet for a loan or a 'prime candidate' and you will be able to get the best rates. However, if your have a credit rating below 640, you are less than prime, or called 'subprime.'
As a subprime borrower, you won't get the best interest rates on loans, mortgages, and car insurance. If you have a credit score less of 500 or less, you will have loan and credit card refusals.
There are three credit-reporting companies but all the information can be obtained from Fair Isaac Corp. Each of the three credit companies will have slightly different information so it helps if you get all three scores to get all the information. If you are going to get your credit report, make sure you also get your FICO score.
Once you know your credit rating, you can work on restoring it.
In some cases, your credit rating may be due to incorrect information. If you have your credit report then you will be able to check this. '
Rebuilding your credit
It is possible to repair your credit rating. Here are some of the steps you can take:
- Don't close down any credit cards you have in an attempt to clean up your finances. The credit amount you have available on those cards actually help your credit score.
- Because this credit that you available on your cards helps out, try to pay down the credit card balances so that there is a large difference between the balances and the card limit.
- If you can, get new credit cards and use them gently. They don't have to all be in use all the time, but make sure you pay off the entire balance every month when you do use them.
- Open up other cards, like department store cards, and gas cards. If you are going to use them, then keep the balances very low. It might be better if you keep the balances at zero.
- If you have extremely bad credit, consider getting a secured credit card. These are available from national banks. You actually make a deposit and the card works like a normal credit card. This will help to restore your credit rating.
- You can also get a small loan and pay it off as quickly. There will be higher interest rates but if you pay it off in a short time period, then the finance charges won't amount to much.
- Another option is to get a car loan with a co-signer. This helps you get a loan at a reasonable rate and build your own credit at the same time.
- Make sure you pay all you bills on time going forward. Don't be late as just one late payment can cause a lot of damage.
If you follow these steps, slowly but surely, you will see your credit report card improve and you will be able to buy a vehicle on your own.
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