If you are ready to get out on the road in a fantastic car that does more than simply get you from Point A to Point B, then you need to spend some time making sure that your credit is strong enough to take on a car loan. With better credit, you will be eligible for a lower interest rate, which will also lead to lower monthly payments. There are many easy steps you can take to ensure that your credit will allow you to borrow the money you need.
Get a Stable Job
Although this sounds like a no-brainer, one imperative in preparing your credit for an auto loan is getting a job. Lenders want to know that you have a steady source of income, and if you can show them pay stubs from the last 6-12 months, this is even better. You don’t need to work in a Fortune 500 company to afford a car, but you have to show diligence and stability in working.
Consider Your FICO
Your FICO score is a standard number that lenders use to see how often you use credit cards, how well you pay your bills, and how much money you owe in debt to other establishments. The scores range from 300 to 850, with anything over 700 considered good credit. Work to improve your credit score, and you will be eligible for a better interest rate for your loan. Experts say it generally takes 6 months to improve your score.
Check Your Credit
You can check your credit score yourself so you know what you are getting into and won’t have any unwanted surprises. There will be a list of risk factors on the score report that you can deal with so that you have a better credit number. Pulling a credit report from the three credit bureaus (Experian, TransUnion, and Equifax) will help you to understand exactly what you are dealing with. This is a good habit to get into, as it can also alert you to any fraud on your account.
When you check your credit score often, you will be able to quickly discern any problems that crop up with your credit. If that is the case, you can quickly dispute the problem and solve the situation before it gets out of hand. With so many unscrupulous people in the world, you don’t want to be stuck with bad credit that you didn’t create.
Lower Your Credit Utilization Ratio
Lowering your credit utilization ratio is another good way to build up your credit for an auto loan. The credit utilization ratio is the measure of how much of the allowable credit you are actually using. In other words, just because you have a large credit limit does not mean you have to use all of it. The smaller amount of credit you use, the better off you will be for securing a car loan.
Pay Off Your Credit Card Every Month
Along with lowering your credit utilization ratio, it is a good idea to pay off your credit card each month. When you let some of the balance ride to the next month, you end up spending a lot more in interest. This will also show your future lender that you are responsible with money and can be trusted to take out a loan.
Save For a Down Payment
Even if you don’t feel like you have a lot of extra income, save some money each month for a down payment. Paying up front with as much down payment as you can will significantly reduce your monthly payment each month, as well as the interest you end up paying. Experts say to aim for 20%. But even if that number seems too high and out of reach, any amount of down payment will lead to a bigger savings for you in the long run, and a better chance of getting a favorable interest rate.
Once you establish good credit and you are ready for the car of your dreams, head to Simons Motorcars on the Bedford Automile. We offer financing right in our store so you do not have to run around searching for the best deals. Simply fill out this form and we can get you on the road in one of our beautiful used cars.