Consumers planning to buy a vehicle on credit should plan ahead. Experts advise checking your score well in advance. You need to make sure it is sufficient and correct any reporting errors detected. Both FICO and VantageScore rely on a scale from 300 to 850. How many points do you need to gain?
Generally, car dealers are eager to find buyers, so their requirements are quite liberal. At the same time, a better score will translate into lower interest and better conditions overall. Eventually, it determines how much you pay for your car in the long run. This explains why so many citizens fix their scores — check creditrepair.com review for typical scenarios.
According to the 2020 report from Experian, consumers with at least 660 points are given an interest rate of roughly 6%. It was determined that the lowest threshold for a second-hand car was 657. For a brand-new vehicle, it was much higher — 721.
Nevertheless, around a third of all borrowers had scores below 600. Even applicants with totals under 500 qualified! These deals constituted 4.5% of loans for second-hand vehicles.
As you can see, buying a vehicle on credit is not that difficult, and you do not have to be a model borrower to be accepted. However, the cost of the loan varies, so raising the total makes sense. Find out about credit repair services cost in your state — you can save money by fixing the score in time. Here is how.
Checking Your Status
The Federal Trade Commission has reported that one in five Americans have unfair credit scores caused by reporting mistakes. To see where you stand, find out your status via My FICO or check it through apps like Credit Sesame. If the total is too low, you can raise it through repair or rebuilding. The choice depends on the accuracy of the information.
The term ‘repair’ applies to the correction of errors. Any data which is unverifiable or unsubstantiated must be removed under the Fair Credit Reporting Act. On the other hand, real derogatories stay on the records for 7 years, and some types of bankruptcies are even more damaging.
If the records are correct, you should work on your current borrowing and spending. There are different ways to boost the total this way. Find out more below.
Raise Through Repair
The law gives every American the right to get a free copy of their borrowing history from each of the nationwide agencies. Go to www.annualcreditreport.com to submit your request. You can download the data from TransUnion, Equifax, and Experian at once. Then, examine the records, paying attention to every line.
Typical mistakes include misspellings, accounts that do not belong to you, and incorrect amounts. You may even discover that your score dropped due to identity theft. Consumers should check their records regularly. Until April 20, 2022, you can collect the information for free every week. Make the most of this opportunity.
Any errors can be disputed formally. This requires the collection of evidence and the creation of dispute letters — check the website of the Consumer Financial Protection Bureau for templates. Alternatively, delegate the job to a credit repair firm. Experts can do everything on your behalf, which accelerates the process. Note that even the simplest cases take a couple of months, so plan ahead.
Overview Of Rebuilding
You can also achieve a boost by working with your current balances and limits and adding more data to your reports. Here are some of the most popular methods. The idea is to adjust different elements that constitute your FICO and VantageScore status. The most important aspects are:
- Previous payments;
- How much you owe in total;
- Age of your records.
1. Balances Vs. Limits
The balances and limits on all of your credit cards determine credit utilization. This is the proportion between the size of available credit and the amounts charged. For example, 4 credit cards with a total limit of $10,000 give 40% of utilization if the collective balance is $4,000. This is well over the recommended limit of 10%.
There are two ways to lower the percentage — by paying off the balances or boosting the limits. If you cannot afford to reduce the debt (to $1,000 in our example), you may ask for a limit extension. However, in our case, you would have to get $30,000 extra (as $4,000 is 10% of $40,000).
This is an unlikely scenario, but it is possible to work on both fronts. If you fail to secure a limit extension, try getting a credit card from a different issuer. Secured cards are the easiest to qualify for.
2. Add More Details
Have you heard of Experian Boost? This free online service allows consumers to gain 12 points on average. You may add utility bills, HBO and Netflix subscriptions, and other payments to the history, so they contribute to the total.
3. Be Careful With Payments
Nothing is as damaging as late or missed payments. Set reminders and plan your budget carefully. If you are just a few days late, do not despair and contact the lender — they may agree not to report your mistake. This is possible because every institution has a reporting cycle, and late payments appear on your records when they are 30 days overdue. You will also have to pay a fee, but the damage may be minimized.
The Bottom Line
Requirements for auto loans vary, and they are easier to get than mortgages. However, you should only expect favorable conditions if your score is at least 660. To secure the best interest rate, boost your status through rebuilding and repair (if necessary).