/How to Improve Your Bad Credit Score by Buying a Used Car
How to Improve Your Bad Credit Score by Buying a Used Car
AutoMax Can Help If You Live Near Raleigh or Durham, North Carolina
A low credit score plagues most people at some point in their lives. The good news is that credit scores are not permanent, and there are things you can do to improve your score. You’ll find that with a strong credit score, you’re capable of changing your life: it becomes easier and less expensive to get a cell phone plan; you can qualify for a better apartment; and you can use your score to make important future purchases, like a house or condo.
AutoMax specializes in helping people with low credit scores, specifically by getting them into a nicer, newer car that they desperately need and most certainly deserve. Because we work in both the automotive and finance industries, we are here to share some tips about how to improve your credit score. Let’s take a look at how credit scores are calculated, and then review a few ways to improve your bad credit score - including by buying a quality used car with a warranty from our buy here pay here car lot in the Research Triangle.
How Your Credit Score is Calculated
The “Big Three,” a trio of credit bureaus (Experian, TransUnion, and Equifax), use a special math equation to calculate your three-digit credit score. Each uses their own algorithm, so it’s possible that your credit score will be slightly different for each. The most common scoring model is the FICO score, which ranges from 300 to 850.
What makes your credit score go up for one, will also increase your score at the others, and vice versa; the only thing that changes is how many points it increases or decreases. Most credit bureaus look at things like your debt payment history, how much revolving credit you’re using, how long you’ve had open accounts at financial institutions, and what kind of accounts you have. How often you apply for new credit is also factored into your score.
Even if you have a checkered credit history or a low credit score, it’s very possible that you can increase your number! It takes a little bit of effort and planning, but it’s completely possible; people do it every day.
Pay Down Your Credit Card Debt
If you’ve racked up a credit card bill that you can’t pay off in full each month, then your first goal toward improving your credit score is to pay down that debt. You will need to pay more than the minimum monthly payment to see movement on your credit score.
Your credit card debt accrues interest. It is calculated by using a percentage of what you owe and is tacked onto the balance on your credit card. The higher the principal - the actual amount of money you’ve borrowed against your credit card - the more interest that will accrue. Your monthly credit card payment mostly goes toward the interest, but only a little bit goes toward the principal. As interest compounds, it’s easy to get more and more behind. If you pay more than the minimum amount each month, you are decreasing the principal you owe, which will help decrease the amount of you owe and boost your credit score.
Once you’ve paid off a credit card, don’t close the account! Closing the account can actually make your credit score take a hit because you have decreased the amount of credit you have available in contrast to the amount that you are using. Instead, periodically use the card for small purchases, and pay it off immediately. This will keep the account open, keep you out of debt, and help to make your credit score climb higher and higher.
Make On-Time Payments to Everyone You Owe
It’s so easy to forget to pay a bill, especially with how busy you are: work, school, taking care of your family, spending time with friends, cleaning, cooking… you’re all booked up! But every time you miss a payment or make a late payment toward a bill, you put your credit score at risk, even if your payment is only late by a couple of days.
Making on-time payments toward your credit card, utilities, rent, and more, can help increase your credit score rapidly. Think about how many bills you pay each month. If you paid all of them on time, you’re looking at raising your credit score by multiple points very rapidly!
To help remind yourself to make timely payments, write down your bill due dates on a calendar in your home or on your smartphone. Set aside time each week to verify all your bills are paid. You can also set up autopay on your utility bills, so that the utility company automatically deducts what you owe from your bank account each month, and provides your bill online only. This is a foolproof way to make on-time payments - just make sure you have the money in your bank account.
Dispute Inaccuracies on Your Credit Report
If you’re not sure why you have poor credit because you feel like you’re doing everything right, you should thoroughly read your credit reports from all three credit bureaus to check for inaccuracies. Incorrect information on the reports can result in a lowered credit score.
You’ll want to check that all the accounts on the report actually belong to you. If you find errors, you need to dispute the reports and request a correction. You can request a free credit report each year from AnnualCreditReport.com. You will need to contact each credit bureau separately to dispute errors; visit their websites to learn more.
Fortunately, errors are not usually widespread. They usually occur because a creditor did not report complete information to the credit bureaus. However, this means that if there’s an inaccuracy on one report, there’s likely an inaccuracy on all of them.
Buy a Car from a Buy Here Pay Here Car Lot
If your goal is improving your credit score, you shouldn’t needlessly apply for credit - like a retail store’s individual credit card, for example. However, if there is something you absolutely do need to purchase, then it’s perfectly appropriate to apply for credit.
Once you’ve paid off your vehicle, usually over the course of two or three years, you may find that your credit score has gone up, especially if you made all of your payments on time!
How to Get a Bad Credit Car Loan in Raleigh
Qualifying to purchase a used car can be difficult from traditional lenders when your credit score is lower than they require. You might get turned down repeatedly for a car loan - which actually lowers your credit score with each inquiry.
To get a reliable used car despite your credit score, visit AutoMax in Youngsville and Henderson. AutoMax is a buy here pay here car dealership that specializes in helping people with low credit scores afford a vehicle.
Our financial specialists will determine how much you qualify to spend on a vehicle based on your monthly income and budget, and then you’ll only see the vehicles you can afford to buy. You can choose your favorite and drive off the lot the very same day.