How to Better Chances of Getting Car Loan?
Applying for a car loan can be an intimidating process, particularly if you’re buying your first car. Take these easy seven steps and accentuate your chances of getting a car loan –
- Timely Payment of Debts – There is no bank that does not want consumers who pay their bills on time. When you do have a debt, such as a Home Loan or a Personal Loan, make sure that you pay your EMIs on time. Same goes for the bill for your credit card. Not only can you escape high fines, but this clean record will also help convince the bank that you are creditworthy and willing to pay your installments on time. Getting a car loan with bad credit history will be smooth-sailing.
- Review your Credit Report – To boost your credit, it helps to know what’s going to work for you (or against you). That’s where the credit background check comes in. Factors that lead to higher credit ratings include a record of on-time payments, low credit card balances, a combination of separate credit card and loan accounts, older credit accounts, and minimal new credit questions. Late or missed fees, high credit card accounts, defaults, and judgments are significant denigrators of the credit score.
- Stay under 30% of Credit Utilization – Credit utilization is the part of the credit balance that you use at any given time. After payment history, this is the second most significant denominator in the estimation of the FICO credit score – one of the most renowned systems of credit score, created by the Fair Isaac Corporation. The best way to keep your credit usage in control is to pay your credit card balances in full per month. If you can’t always do that, a reasonable rule of thumb is to keep your overall balance at 30% or less of your total credit cap. From there, you can focus on slicing down to 10% or less, which is deemed to be perfect for raising your credit score. Another way to boost the credit utilization ratio is to apply for a raise in the credit cap. Increasing your credit cap will improve your credit usage as long as your balance does not escalate in tandem. Many credit card providers require you to submit a credit limit raise online; you only need to update your annual household income. The approval for a higher limit can be had in less than a minute. You may also ask for a raise in the credit cap over the phone.
- Minimize Hard Inquiries – Hard inquiries can adversely impact your credit scores as they are more stringent. They are conducted before applications for a new credit card, auto loan, mortgages or any type of new credit. Banks will interpret such a move to be a consequence of financial instability hence the need for more money. Don’t apply for new credit to keep your scores from plummeting.
- Use Credit Monitoring Services - Many of the best credit monitoring systems help warding off identity theft and fraud. For example, if you are alerted that a new credit card account is being reported to your credit file that you do not remember opening, you can call the credit card company to report alleged fraud.
- Get Rid of Delinquent Accounts – If you have delinquent accounts, billings, or collection accounts, take steps to fix them. When you have an account with several late or missed payments, for example, you are stuck on the past due amount, get busy figuring out a solution to make timely future payments. That’s not going to erase late fees, but it will better your payment history.
- Keep Old Accounts Active – When you have old credit cards that you don’t need, don’t shut them down. While the credit history of those accounts will stay on your credit report, closing credit cards while you have a balance on other cards will decrease your total credit and raise your credit usage ratio. That might deduct a couple of points off your overall credit score.