/How is My Credit Score Determined for Buying Used Cars?
How is My Credit Score Determined?
Understanding How to Improve Your Credit to Buy Used Cars in North Carolina
Your credit score can have a profound effect on your life as it affects your ability to get credit and the cost that you will pay for the credit that you get.
Many people do not realize it, but they have multiple credit scores that are generated by different companies that provide credit rating services. Three major credit bureaus provide credit scores—Equifax, Experian, and TransUnion.
Your score from the three reporting bureaus will vary. One factor which will cause different credit scores between the three bureaus is that they each use different scoring models that weigh various factors differently.
Another factor that weighs into credit score calculation is the fact that lenders and creditors may not report information to all three credit bureaus. They may only report information to one or two of the bureaus.
There are also variations of the credit scores from each of the bureaus, such as FICO and VantageScore. Different lenders and creditors use different scoring sources depending on the industry they are in, as each industry may give more weight to different facets of the credit score and thus rely on the bureau most aligned to their needs. Some lenders will also use a score that is calculated based upon the scores of all three of the bureaus.
Components of your credit score
The major factors that are used in the scoring models include the number of credit accounts that you have, the types of accounts, the ratio of your credit used as opposed to the credit you have available, the length of your credit history, and your payment history.
When looking at your payment history, a lender is simply attempting to determine if they lend you money whether you are going to pay it back within terms. They will look at your history of payments on credit cards, mortgage loans, installment loans, and finance company accounts. They will look for late and missed payments on these accounts and any defaults on them.
The ratio of used credit will give the lender an indication of how responsible you are in managing your credit. Having accounts that are maxed out or nearly maxed out may be an indicator of impending problems.
Lenders will also want to see a mix of the various types of accounts in your credit history indicating that you can responsibly manage your credit.
Another factor that lenders will consider is how many new accounts you have opened recently, which will impact the length of your credit history.
A factor that will also be considered is hard inquiries. Hard inquiries are defined as a check of your credit by a lender or creditor with whom you have applied for credit. A large number of hard inquiries may indicate to a potential creditor that you are attempting to obtain credit from too many different sources at the same time.
If for any of several reasons such as loss of a job, divorce, or any other reason you find yourself in the position of having an impaired credit rating, there are steps you can take to help raise your credit scores. An important factor that can improve your credit score if you are in the market for a reliable vehicle is to look for a source to provide you with that vehicle and the financing you need to purchase the vehicle.
One method of achieving this is to check out used cars for sale from AutoMax, which is experienced in helping people with bad credit buy a car. For years, we’ve been the premier source for used cars in North Carolina.
At AutoMax, we don’t rely at all on credit scores in determining whether to make a car loan to you. We simply look for proof of income, which shows us that you can make the payments on your vehicle purchase. AutoMax will report your successful payment history with us to the credit bureau, which will be a big factor in how to improve your credit.