Negative information in your credit report can cost you a great auto loan deal. It’s an indication that you need to work on your credit. While bad credit auto loans are available, getting approved for the most competitive rates is still easier with good credit. With this guide, we’ll teach you small DIY steps to improve your credit.
1) Get the evidence that your credit needs some fixing.
The first thing you need to do is pull out a copy of your credit report. This is not much of a hassle since the government allows consumers to get a free copy every 12 months from Experian, Equifax and TransUnion. You can do that through AnnualCreditReport.com.
If you want to see your credit score, you will have to purchase it separately. The free credit report you can get from the 3 most trusted U.S. credit bureaus does not indicate your score.
2) Examine the report and dispute errors.
Don’t just scan the document once it’s in your hands. Examine it thoroughly and look for errors or inaccuracies. Yes, credit bureaus sometimes unintentionally make mistakes. So don’t get easily disappointed when you find errors in your credit report.
What you should do instead is contact the credit bureau and dispute the errors. You can do this by writing them a letter or using the dispute form provided along with the credit report. Errors lower credit rating unnecessarily so it’s important to have them corrected as soon as possible. Your credit can be a lot better when errors are cleared out.
3) Get rid of your debts.
Some finance advisers say that the debt with the largest interest should be the one to be paid down first. That makes sense. But some also suggest paying down credit cards which balances are closest to their limits.
Paying down debts is necessary to give your credit a quick boost because your debt-to-income ratio accounts for 30% of your credit rating. If funds are not sufficient to pay down at least a debt, try negotiating for a higher credit limit with your credit card companies.
4) Pay on time.
Delinquency affects your credit seriously. If you know yourself as forgetful or disorganized, consider setting up automatic payments for your credit accounts. You won’t miss a payment this way. Timely payments improve your credit big time. Moreover, if you choose payment via automatic deduction, your lender might give you a discount for your willingness to ensure on-time payments.
5) Establish a stronger credit.
If you have been denied an auto loan because of lack of credit, you need to have a more established credit history. There are several ways to do that. One is getting a credit card, if you don’t have much of them yet. A secured credit card can help you improve your credit by making timely payments.
If you are to close accounts, don’t do it one time with multiple accounts. Instead, close little by little over several months. Also, close the newest accounts and retain the oldest ones. This helps you build a longer credit history.
One reminder: Regarding all your efforts to improve your credit, make sure that the credit companies you’re working with report about them to the credit bureaus. Otherwise, your efforts are in vain.