How to Improve Bad Credit Scores
If you want to purchase a car with an affordable auto loan, raising your credit score can help you to qualify for the lowest rates and best terms. But how do you go about improving a bad credit score? Following are a few recommendations to help you boost your score quickly before applying for a vehicle loan or before you consolidate your car loan.
• Order your credit report. An FTC study reports, “five percent of consumers had errors on one of their three major credit reports that could lead to them paying more for products such as auto loans and insurance.” If you dispute such an error successfully with the bureau, that could raise your score.
• Get your credit utilization under 30%. If your credit utilization is higher than 30%, that can reduce your score.
• Keep old accounts open if you consolidate your debts. Consolidating your debts can be a smart move, but closing aged accounts is not a good idea. The older your accounts are, the better that is for your credit score. If you have a hard time maintaining a zero balance in aged accounts without closing them (but do not want to use them), consider simply restricting your own access to those accounts for a while. If you want to close them after you successfully sign on an auto loan, you can.
• Open new accounts, but watch out for hard credit checks. If you have more cards but don’t use them, you’ll reduce your overall credit utilization while boosting credit diversity. Just be aware that it is common for creditors to run hard credit checks when deciding whether to allow you to open an account with them. Keep such checks to a minimum or avoid them entirely while applying for auto loans. Try and choose lenders that run soft credit checks instead. These will not cause your credit score to drop.
• Ask for a higher limit. If you have a solid record as a customer, it may be worth asking if your credit card limit can be raised. Doing this would reduce the percentage of your credit that you are utilizing even if your balance remained the same. You have the highest chance of success if you have a long-standing relationship with the credit card company or the bank that issued you the card. It is certainly worth it to ask. The worst they can do is say “no.”
• Request that bad entries be expunged. If you have repeated lapses on your record with a creditor, those entries are going to stay in your credit report. But if you have a single lapse with a company that you otherwise have had a glowing relationship with, they may honor a request to expunge that one negative entry.
• Get your utilities reported. Did you know you can have utilities and phone bills reported to Experian? Just sign up for Experian Boost. This program is free. The boost your credit is immediate. Even if this is the only thing you do to try and improve your credit before applying for an auto loan, it could make a sizable difference.
• Keep up with your current bills. You do not want to fall further into debt or submit late payments which could wind up on your credit reports. Automatic bill pay can help you send payments on time.
Even if you do not have a lot of time to improve your credit score, you can see that there are a number of ways you can potentially increase your credit right now. Give these suggestions a try. It could just save you money on your next car loan.