If you want to get approved for an auto loan — with a good interest rate — your credit needs to be in good shape. Don't know where to start? Improving a credit score is a process, but it's not as hard as you might think. Here are some great tips to help you get your score auto loan ready.
Lower Your Balances
Start working on paying down the balances on any of your credit cards. Auto lenders look at a lot of things, but mainly they look at your ability to repay.
If a lender sees that you are carrying high balances, on several cards, they may have concerns as to whether you will be able to maintain payments for the cards and your new vehicle, which may lead to a denial. A general rule is to keep your card utilization under 30 percent.
Review Your Report
Take a few moments to look over your credit report, as these reports are not always 100 percent accurate. When reviewing your account, not only do you want to verify that each account listed is yours, you also want to verify that the balances are accurate, keeping in mind that the figures might be one month behind.
To be on the safe side, request a free copy of a report from each of the three major bureaus and report any discrepancies right away.
Ask for an Increase
If you really need a new vehicle and have somewhat of a high balance on your cards, ask your credit card company for a credit line increase. However, you want to make sure it's an in-house review and not a hard pull on your credit report. The more available credit you have, generally, the higher your credit score, so increasing your amount of available credit through a limit increase can help you boost your score.
Take a Credit Vacation
Another way to boost your credit and chances for a loan is to take a credit vacation. A credit vacation is basically a period where you don't have any inquires on your report or open new accounts.
Each time you get a new inquiry on your report, your score may lower and each time you open a new account, this lowers the age of your credit history, which can also cause your score to lower. Consider going on a credit vacation for a few months leading up to your purchase, such as 6 months.
Contact a lender like Frontier Community Credit Union to find out more about auto loans.