Buying a car is a big purchase decision and if you’re going to finance it, then you’d want to be in the best position possible so that your car finance application will be approved. One of the most important steps to take is to ensure that your credit score and history are solid. The higher your score, the better your chances of getting a good car finance deal. Let’s take a look at some of the best tips on how to build your credit.
Register to Vote
This step is perhaps the simplest and easiest step you can take to improve your credit score. By registering to vote, you can potentially increase your score by up to 50 points. That’s a lot of points with just a single step so make sure you take the time to do this.
Whenever you move to another flat or house, update your address information. Even if it’s not an election year, get registered to vote so you can change the address recorded under your name. Check all details first before you make any car finance applications.
Make Payments on Time
In building your credit score, making payments on time is crucial because it is how you can demonstrate to lenders that you’re a responsible borrower. You can show that you stick to the payment schedule as well as to the given credit limits.
In case you’re facing financial difficulties and you’re finding it hard to pay your debts on time, then the best thing you can do is to get in touch with the lenders. Inform them as soon as you can about your situation and negotiate an arrangement for your payments.
Paying late or missing a payment altogether will appear on your credit report within one month. Even just one missed payment on your loan or credit card can hurt your credit score and could knock off up to 130 points. Not only that, the record of the missed payment will stay on your credit report for the next six years.
That’s why before you take out any loans or use your credit card for big purchases, see to it that you can afford to pay it back. The consequences of missing a payment can definitely affect your ability to secure credit later on. Take good care of your credit record so that lenders will feel confident in giving you a loan.
Check Your Credit Report for Errors
You’ll be surprised to know that about three out of ten people don’t check their credit reports. Checking your credit report will allow you to gauge your chances if you’re applying for a loan or car financing. Also, it’s a good way to know if your credit report is accurate or if it contains any suspicious transactions or errors.
Go through the details of your credit report and check whether your name and address are correct. Errors in your address can actually impact your loan or finance application negatively. You may also want to check if there are missed payments recorded incorrectly or fraudulent charges under your name.
If you spot any errors, contact your lender immediately. You may also inform the CRA who will then get in touch with the lender on your behalf. In the next 28 days, the CRA will review the dispute and then get back to you to let you know about the steps taken to resolve it.
Perform Soft Searches to Check Eligibility
Whenever you’re planning to apply for credit, try to perform a soft search first. It’s a good way to know your chances of getting approved. And if you find that your chances are good, then you can start working on your formal application. Bear in mind that lenders will perform a hard check on your credit report when you apply for a loan and that’s going to knock off a few points on your credit score temporarily.
If you find that you’re not eligible for a loan after performing a soft search, then it’s best not to proceed with your formal loan application. Not only will your application be rejected, but the hard search that the lenders conduct will also hurt your credit score. Instead of applying, you may want to take your time to build your credit score first. Only apply when you’re fully confident that you’ll get approved.
Don’t Apply to Multiple Lenders at Once
When a lender rejects your loan application, you might want to proceed to the next lender immediately and apply for a loan there. However, this is a bad idea. Applying for a loan to multiple lenders within a short period won’t look good in your credit report. It will make you seem desperate and lenders may not be confident in providing your credit.
Whenever you apply for a loan, remember that it will stay on your credit report for a good 12 months. So, if you’re rejected the first time, spend the next year improving your credit score before you apply for a loan again. Yes, it takes time but the better your score, the higher your chances of getting approved. Also, with a good credit score, you may also enjoy better interest rates.
These are just five ways to build your credit. Maintain a good credit score and take the steps to improve it whenever you can. Lenders rely on your credit report to evaluate your behaviour concerning your finances like how you spend and whether you pay your bills on time. Take good care of your credit report and score so that you’ll have better chances of getting approved whenever you apply for a loan or car financing.