When preparing to apply for an auto loan, it’s imperative that you optimize your credit score. Not only will this increase your chances of being approved, but it will also ensure that you get the best rate for your new auto loan. Whether your credit score needs a major overhaul or you are simply trying to fine-tune a few things to reach that new bracket, check out these tips for preparing your credit score for an auto loan.
Find your weak spots.
In general, the tiers for credit score worthiness are as follows:
Excellent Credit: 750+
Good Credit: 700-749
Fair Credit: 650-699
Poor Credit: 600-649
Bad Credit: below 600
After you evaluate where you stand on this scale, dive into the more-detailed credit report and identify your weak spots. This could be late payments, high credit card balances, or not enough credit limit. Once you identify these spots, make a plan for improvement.
Get a credit card and use it for regular payments.
But remember to pay it off! A credit card is one of the easiest and strongest ways to build up your credit score. However, with great power comes great responsibility. Misuse of a credit card without regular payments can hit your score hard. One suggestion is to use your credit card for monthly payments such as gas, utilities, or subscription services that you can then immediately pay off. If your credit score is hanging out in one of the lower ranges and getting approved for a credit card is difficult, a secured credit card is a wonderful option for building credit. This involves making a small deposit that will secure your credit line.
Keep your balances low.
If you have a credit card and other loans linked to you, even if you are paying your balance on time, your credit score could be taking a hit from too high of a balance. This means if you have a credit line of $2000 and you are consistently maxing out this credit line, your score is probably reflecting this. It’s important to show possible lenders that you can responsibly maintain a higher credit line without having a high balance. Working on keeping this ratio low is important in improving your overall credit score.
Take care of any hits to your account.
This could come in the form of late payments, collections, or any other derogatory marks. Sometimes, these go away with time, but that window is generally upwards of seven years. If your late payment was the result of something excusable like being gone on vacation or an emergency situation, perhaps contact your credit card issuer or the debt collector and ask if there’s anything you can do to get this mark removed from your credit. Once you do, you’ll see a pretty big improvement in your score.
At Blue Sky Auto Finance, we believe in helping you get the best rate for your new auto loan. We work with credit scores of all types, even those that need a bit of polishing. Find out how we can assist you today!