If you want to buy a new car and your credit is far from perfect, the bad news is that a less-than-perfect credit report may make it difficult to get a good rate on a car loan. The good news is that it's possible to fix your credit score. In fact, with a little planning, you can improve your credit score before you go shopping for that new car. Here are three simple tricks that will help you get a loan for a new car.
Pay down Your Debt
If all your credit cards have balances owing, you should pay those down before you start shopping for a car. Having a balance on several cards can damage your credit – even if you're always on time with your payments. Once you've reduced the balances on your cards, your credit score should go up to reflect the changes. Once you have your credit cards paid down, try to limit your purchases to just one of your cards. That way, only one card will show a balance on your credit report.
Correct Your Credit Report
You may know your credit score, but have you taken a close look at the actual report? Have you looked at all your reports? There are three major credit reporting agencies – Equifax, Trans Union, and Experian. Each credit agency has their own reporting criteria.
Before you apply for a car loan, take a look at all three credit reports. If you find mistakes or outdated entries, be sure to contact each agency for adjustments. Having just one agency remove erroneous information will not remove it from the other two, which could jeopardize your chances of getting the loan you need. Some erroneous information that should be removed from your reports include:
- Collection accounts that are older than seven years old
- Addresses that don't belong to you
- Accounts that are not yours
Once you've had all the erroneous information removed from your credit report, you might find out that your credit isn't as bad as you thought.
One of the best ways to ensure you'll get the loan you need at the rates you want is to get pre-approved. You may not realize this but each time you apply for a loan, a hard credit inquiry is noted on your credit report.
So, if you apply for a loan at three different dealerships, each of those applications will show as an inquiry on your credit. However, if you apply for a loan online, you'll be able to go to any dealership with that approval and there will only be one inquiry on your credit report.
Now that you're in the market for a new car, don't let your credit keep you from getting the one you want. These simple tips will help you improve your credit so you can get the loan you need.