Having a car is often a necessity, but most people don’t have thousands of dollars hidden away to buy a new car outright. Instead, most people need to get an auto loan in order to buy a car.
In order to get an auto loan, you first need to qualify for one, and this depends entirely on your credit score. If you have a high credit score, you will likely qualify for an auto loan with a low interest rate. If you have a poor credit score, you may qualify for an auto loan with a high interest rate, or you may not qualify at all.
If you have a low credit score and you want to qualify for an auto loan, you need to learn how to boost your credit score. The following tips will help you do just that.
Know your score.
Before you go shopping for an auto loan, it’s a good idea to first know what your credit score actually is. You can get your credit score for free on a variety of different websites, such as CreditKarma.com. These websites will show you where your credit score stands with all three credit bureaus, as well as tell you why your credit score is where it is, whether low or high.
Pay down your credit card balances.
If you have credit cards that are almost maxed out, this is hurting your score. Paying off your credit cards entirely will be the most effective way to boost your score, but you may not have the cash to do this. If you can’t, just be sure to pay down the balances as much as you can. Typically, having a balance below 30 percent of the card’s limit will help improve your score. So, if you have a credit card with a $1,000 limit, try to pay the balance down to at least $300. Then, try as hard as possible not to go above this 30 percent mark unless you know you can pay it off the following month.
Limit your usage of credit cards.
Your credit score is also determined by the number of credit cards you have open. If you have a lot of credit cards, and you use each of them all the time, this could be hurting your score. Instead, try to not only limit the amount of credit cards you have open, but also limit the amount of credit cards you use. For example, instead of putting $50 on one card and $100 on the other, just put the entire $150 on one card.
Don’t apply for a loan unless you’re ready.
Most people don’t realize that every time you apply for a loan or a line of credit, it puts a mark on your credit report known as a hard inquiry. These hard inquiries will stay on your credit report for up to two years, and they can make your credit score drop a few points every time you apply. Instead, wait to apply for that credit card or loan until you are entirely sure you’re ready and that you’ll be approved. Having one hard inquiry is less damaging than multiple hard inquiries.
Seek professional help.
Sometimes seeking the help of a professional is what you need to improve your credit score. There are many companies out there that specializing in helping people get their credit back on the right track and improve their credit scores. BoostCredit101.com helps people improve their credit score in as little as two weeks, so if you’re in need of a credit bump in a short amount of time, this is the route to take.