When rates threaten to increase car prices again, many Americans say they feel rushing to buy a new car.
However, there is a big problem when you need to buy a car: this does not give you the opportunity to improve your credit points first.
As car prices rise, good credit is even more important as it is the key to better and more affordable loans. As a former NFCC certified credit advisor who helped thousands of users prepare for the purchase of cars, here’s what I want to know about your credit scores before buying.
According to Santander’s survey, about half of all car buyers start the car purchase process by visiting a merchant mission. However, given how important it is to buy cars and how long you need to improve your credit, I recommend starting your credit reports and scores.
Some trades are promoting to lend you money, even if you don’t have a credit. But the truth is that you need a good credit with a score of about 660 or more if you want to get a car loan from a trusted lender.
Here’s how your credit starts when you want a car loan:
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Better options to confirm: The higher your credit scores, the more likely you are to be confirmed by a car loan and a reliable lender.
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More loan options: People with higher credit scores will confirm more lenders, which will allow them to compare several offers and choose the best and most affordable loan.
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Lower interest rates: With higher credit scores, they are more prone to lower interest rates, which means you will have lower monthly installments and save money on the total cost of repayment of the loan.
How much can you save on a car loan if you have good credit? It depends on the loan, but here is an example based on the current rates of three different credit points:
There is no minimum credit score that needs to be approved for the car loan. In this context, with higher scores, it will be easier to avoid predatory lenders and obtain confirmation for the lowest interest rates.
According to Experian, you can be confirmed for a “deep subiprimage” loan if your scores are 500 or less. However, the average interest rate of these loans is greater than 15% of a new car loan and more than 21%.
For “basic” rates, you will need more than 660 points and most lenders will confirm you for a car loan. However, to offer the lowest rates, your scores will usually have to be more than 780.
Read more: Understanding of the Basic Norm: Interest rate that banks charge to the best customers
Unfortunately, you cannot increase your credit 100 points overnight. But if you give you at least a couple of months to work, you can make meaningful improvements. Here are some tips to improve your credit scores before applying for a car loan.
Many credit reports have errors, and there is a chance that errors reduce your credit scores.
Visit the anninecreditReport.com and pull out all three of your credit reports for free and check that there are any errors such as payments, incorrectly reported as “late”. If you find a mistake, follow the report instructions to submit a dispute and make a mistake.
As your credit card debt increases, your credit scores will increase. Just remember that the change in your account balance can take from 30 to 45 days to affect your scores.
In addition, some people have to choose to pay a credit card debt and have sufficient funds for the car’s contribution. If you are not sure what is the best choice, review your information with a loan officer in a credit union or bank. Unfortunately, there is a chance that you may need more time to save money and / or pay off your debts.
Read more: 4 ways to increase cash flow and pay off the debt faster
If you have a loved one with excellent credit, ask them to include you in one or more of them credit cards as an authorized user. When they do, information about their account will appear in your credit reports and help you improve your credit scores.
I saw that many people accidentally reduced their credit scores by trying to get points for buying a car. Here are some credit scores errors that need to be avoided if you expect to buy a car:
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New debt: By applying for new credit cards and loans and gaining new debt, you can harm your credit scores. If you are planning to open a new account, do not make it within six months before applying for a car loan.
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Closing debt accounts: Credit cards and loans can be caused by your credit scores. This is a great idea to pay off your credit card debt early, but if you do it, be sure to leave the account open.
Read more: 8 common reasons why your credit score could have fallen
The higher your credit scores, the better the situation you will buy. However, many banks and credit unions are required to have more than 660 scores to confirm you for automatic loans.
You can get a loan for a car with a credit score of less than 600, but you will probably have to pay a particularly high interest rate. If your scores are less than 600, consider saving a higher contribution or applying to Cosignner to help you get lower rates.