Tips To Prepare Your Credit For A Car Loan Application
If you're thinking about buying a car, you need to start preparing your credit as soon as possible. Getting the best rates on your car loan means having a good credit score and a credit report that shows consistency and reliability. If this will be your first time applying for a car loan, here are a few tips that you can use now to get your credit ready for the application process.
Check Your Report Details
This is an important first step. You can't even adequately prepare to shop for a loan unless you know your credit score and what's on your reports. Pull a copy of your reports from each of the major credit bureaus, then take time to go through each one. Look for any information that may be inaccurate or out of place. Don't be afraid to contest things that you aren't sure of or that you know are not correct.
When you contest them, they'll have to come off your credit report while the credit bureau investigates the item. If it's proven valid, it'll be put back in place, but in the meantime, it will be off your report. It's particularly important that you look at the history on any other loans you may have had, as the payment activity on these will be heavily considered.
Make Sure Your Payments Are On Time
For any loans or open accounts, make a point to start making all of your payments on time. This is important because the most recent payments are weighed the heaviest in your credit score. While late payments will stay on your credit for seven years, they become less of a factor in your credit score calculation as they get older.
Pay Down Your Debt
If you have any credit cards, look at your credit utilization percentage. If you're using more than ten to twenty percent of your available credit, pay the balance down and keep it down. The less utilization you show, the better. At the same time, avoid closing any accounts you're not actively using. One of the things that helps your credit is the length of time on your accounts. If you close an account, you lose the benefit of the time that account was open. Keep your credit history strong by leaving your existing accounts open and active while you're shopping.
Know How Much You Want To Spend
When it comes to determining how much you are willing to spend, you need to be sure that you're being reasonable about your budget. Look at how much you can realistically afford and then shop for cars in that price range. Don't try to overextend your budget, even if you think the higher monthly payment could be okay. Knowing roughly how much you want to pay for the car will also make it easier for you to have a down payment because you can save a percentage of that total purchase price. The more you can put down, the less the bank has to loan you. This shows your vested interest in the vehicle, which makes them more likely to lend to you.
For more information, contact financial institutions like US Community Credit Union.