How to Boost Your Credit Before Buying a Car

Good credit is vital if a prospective car buyer wishes to get the best loan rate possible on a new vehicle. Take these steps to build a positive credit history so lenders are more likely to consider you a reasonable risk.

Make Your Payments on Time

Honesty is one of the most critical factors in terms of making sure you’re seen as a dependable creditor. When you say you’re going to make payments of a certain amount each month, pay them on time. A long history of this kind of behavior will make you look responsible to the creditors who look at your record. If they know their investment is going to be returned, they’ll be far more likely to extend their hand in financial support.

Don’t Take on Too Much Debt

The higher your outstanding debt, the lower your credit score is likely to become, and the more creditors will see you as a bad risk. It’s ideal, especially where credit cards are concerned, to never take on more debt than you can pay off each month. Keeping your credit card paid off entirely from month to month will enable you to avoid interest charges entirely. Avoid making minimum payments for extended periods, as this can cause you to end up in far greater debt than when you started.

Get a Second Credit Card

If you have $500 in debt and a $1,500 credit limit, you’re carrying one-third of your limit in debt. Get your hands on another credit card with the same limit, and your total percentage drops to one-sixth. This significantly decreases your debt percentage without reducing your debt total, making you look more appealing to possible creditors. Your percentage of credit debt to total available credit is far more important to them than the sum itself. The lower the former gets, the higher your credit score will rise.

Go for a Slightly Older Vehicle

A particular model of car is a lot cheaper a couple of years old than it is new. That lower cost means lower payments and lower credit and loan requirements. The lower your credit and loan requirements are, the more likely creditors will be to take on your risk. 

If you bite off more than you can chew by buying a high trim of a vehicle from a new model year when you can’t afford it, you can easily find yourself under a mountain of debt that you can’t pay off. Very few things are more damaging to a credit score than that sort of debt record.

Avoid the ‘Buy Here, Pay Here’ Trap

Dealerships who offer “buy here, pay here” sorts of plans tend to have less strict credit qualification requirements, apply their loans to inferior vehicles at inflated prices, and otherwise take advantage of consumers with questionable credit. These plans often cause the debt level of the buyer to increase considerably over time. Avoid them at all costs.

Follow all of these steps, and you’ll be well on your way to higher credit limits and a better credit score. As these build up, you will look more and more appealing to creditors, making a car loan with a great rate and term attainable.

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