How to Improve Your Credit Score Before Applying for Auto Loans

You need a car, but you have bad credit. Does this mean getting a good car is impossible? Not necessarily. If you’re ready to buy a car, you’ll need to work on your credit before going shopping at a bad credit car dealership.

Your credit score is a three-digit number that lenders use to help them decide how likely it is they’ll be repaid on time if they grant you a car loan. The higher your score, the more likely you are to qualify for car loans at the most favorable terms, which will save you money. All car loans are made easier the better your credit is, even if it’s still “bad.” Yes, there’s a big difference between a 400 and a 550 FICO score. Check your credit report as soon as you start thinking about buying a new car, even if it’s months in advance. Then, get started working to improve it.

#1 Pay your bills on time. Past payment performance is usually considered a good predictor of future performance. When lenders review your credit report when you want a loan, they’re very interested in how reliably you pay your bills. This means paying your bills on time, over and over again, raising your score. This is what they want to see! You’ll want to pay all bills on time, not just credit card bills or your mortgage. Also pay your rent, utilities, phone bill, and other “smaller” bills on time.

 #2 Pay down your debt. The credit utilization ratio is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit. For example, if you typically charge about $2,000 each month and your total credit limit across all your cards is $10,000, your utilization ratio is 20%. Lenders typically like to see low ratios of 30% or less. This means you aren’t over extending yourself financially. Before you begin to car shop, pay off as much debt as you can and keep your credit card balances low.

 #3 Get approved for a bad credit loan. There are bad credit car loans in Baltimore geared specifically to people like you. As stated above, paying your bills on time raises your score. You need a loan to have bills to pay on time, right? As you make your payments for this loan on time every month, your credit will improve. Eventually, you’ll have good credit again (or for the first time!) just by driving the car you wanted anyway.

If your credit history is not where you want it to be, improving your credit score is the way to go. This takes time, but the sooner you address the issues that might be dragging your score down, the faster your credit scores will go up. You can increase your scores by taking several steps, like establishing a track record of paying bills on time, paying down debt, and taking advantage of bad credit car loans in Baltimore.

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