6 Simple Ways to Get Approved For a Car Loan
Purchasing a car can be very exciting but it can also be quite stressful. If you’re crossing your fingers that you get approved for a car loan, you may need some backup. The first step in getting that shiny new car is understanding your credit score, a very important factor to getting approved for your car loan.
Why does all of this matter? If someone’s going to lend you money, they need to evaluate the potential risk, so they can reduce any losses due to bad credit. The good news is you’re on your way to getting your credit score to where it needs to be.
We have the tools to help you fix your credit. Give us a call for a FREE credit report consultation.
1) Know Your Credit Score
Before you set your sights on leather seats, power steering and the extras you dream of in your next car, you must know your credit score. Your credit score is primarily based on a credit report, which is your credit history. These are compiled by three independent credit bureaus-Experian, TransUnion and Equifax.
If the debt is valid, then you may want to consider approaching the collection agency with a pay for delete letter. This is a negotiation tool that may be useful if your credit reporting time limit is years away since negative credit items aren’t automatically removed from your record when you pay them off.
How is your credit score determined?
- The number of credit card accounts you have, including outstanding balances
- The number of loans you’ve taken out and how many you’ve paid back
- Your history of payments for all your accounts, including timely payments, late payments and missed payments
- Any larger financial setbacks such as mortgage foreclosures and bankruptcies
2) Fix Your Credit Score and Educate Yourself
This may seem like an obvious way to get approved for your car loan and you’d be correct. It’s also the easiest way to walk out of the dealership with keys in hand. Easier said than done as we all know. Understanding your credit score goals as well as the meaning of good versus bad credit will get you closer to credit success.
The accuracy, fairness and privacy of your credit information falls under The Fair Credit Reporting Act. The FCRA is a federal law that regulates the way credit reporting agencies can collect, access, use and share the data they collect in your consumer reports.
3) Investigate Your Credit Score
If you discover that your credit score needed for a car loan is further away than you had originally estimated, it’s time to dig deeper.
If you think there’s a mistake on your report, do something about it as it can severely impact your score. In fact, one in five people has an error on at least one of their three credit reports, as reported by the Federal Trade Commission.
4) Lower Your Monthly Car Payments
If you can put money down toward your new car loan, your monthly payments will be lower. You will also get a better interest rate or shorten how long your loan will be. A down payment can offset the interest, taxes, and fees you will be responsible for.
Even though you may have poor credit, a down payment is money-in-hand that a lender will take into consideration when weighing the risk of giving you a loan. Saving for a down payment can make the difference in getting approved for the car loan you need.
5) Utilize Your Resources
For guidance, you can perform a simple online search, talk to your dealership, your bank and credit unions. They may be able to offer you options, lead you in the right direction and educate you. For example, as you are building your credit back up, there may be better refinancing options to take advantage of.
Getting preapproved for a car loan from a lender can be quite helpful and advantageous when walking into a dealership. This preapproval lets you know how much you can borrow and lets the dealership know you are serious and have done your homework.
Turning to the numerous resources available all around you, will provide you with options and coaching at a time when you need it. That said, not everyone has your best interest at heart, so be aware.
6) Don’t Get Scammed
“If it sounds like it’s too good to be true, it probably is”, as the saying goes. Credit scams are alive and well. The CROA, Credit Repair Organizations Act, “bars companies offering credit repair services from demanding advance payment, requires that credit repair contracts be in writing, and gives consumers certain contract cancellation.”
If you feel you’ve been scammed by a credit repair company, there are real and honest businesses that can help you actually repair your credit.
You’re never alone when navigating the waters for qualifying for a car loan with bad credit. We’ll assist you along your journey to having good credit. Whether it’s credit alerts, credit counseling, identity protection, monitoring a monthly score analysis or all of the above, we’ll help you reach your credit score goals. This means you’ll be that much closer to purchasing the car of your dreams.