Effective Strategies to Build or Repair Your Credit Score for Auto Finance

Posted Monday, Aug 26, 2024

Ever found yourself scratching your head over your credit score? You are not alone.

Whether you are just starting to put money aside to pay down your credit card debt or trying to bounce back from a few bumps in the road, building or fixing your credit can feel like navigating a maze. But don’t worry because we have got your back.

Your credit score decodes your financial history. It’s that little number that can open doors to new opportunities or slam them shut. Want to buy a car, rent a flat, or finally become a homeowner? Yep, your credit score plays a role in all of that.

But here’s the good news: If you are in the yellow or red zone (referring to the credit score rating colors), no matter where you are right now, you can turn things around. From understanding what’s on your credit report to mastering the art of on-time payments, there are plenty of ways to give your credit score the boost it needs. So, let’s get started:

Tips to Build Your Credit Score

Check Your Credit Reports

Knowing where you stand is the first step in improving or repairing your credit. Get a copy of your credit report from Equifax, TransUnion, and Experian, the three main credit bureaus. Each agency offers a free report every year that you can obtain at AnnualCreditReport.com.

Here are a few things to look for in your credit report:

• Open bank accounts, as well as those that have been closed for a maximum of ten years, are shown on the credit report. Search for accounts you are not familiar with, payments that are mistakenly recorded as late, and other such mistakes.
• Your personal information, including your name and mistakes in it, your birthdate, your present and previous addresses, and your employment history.
• When a business or individual obtains a copy of your credit report, an inquiry takes place. When you apply for credit, there are hard inquiries made; an unseen hard inquiry may be a sign of fraud.

Dispute Errors on Your Credit Report

Even a simple late payment, which was made on time, can result in inaccurate negative information that lowers your credit score.

So, carefully review your credit reports for any errors or fraudulent accounts. Dispute any inaccuracies with the credit bureau. A default loan stays on your report for seven years. This is why it is essential to ensure that your credit report is clean if you plan to apply for a loan in the future.

Pay Your Bills on Time

It is important to consistently pay your bills on time. Like default payments, late payments also stay on your credit report for up to seven years. Set up monthly automatic payments. This way, money will be deducted from your account before the due dates.

Reduce Credit Card Balances

Your credit score may suffer if you have large credit card debt. Try to maintain a credit usage ratio of less than 30% and settle all of your debts in full every month. If that’s not feasible, focus on paying down high-interest debt first.

Avoid Opening New Credit Accounts

Opening several new accounts in a short period can negatively impact your score. Each application for new credit results in a hard inquiry, which can lower your score slightly by around 3 to 10 points.

Use a Secured Credit Card

A secured credit card is a great option for building or rebuilding credit. The only significant distinction between a secured credit card and a standard credit card is the need for a security deposit. You deposit a refundable security deposit (sometimes as little as $100) when opening the account, and this deposit usually sets your credit limit. The credit card issuer will use your deposit to cover your bill if you fail to pay it.

Even if your credit is not the best, the security deposit helps the credit card issuer take less of a chance and makes it more feasible for you to obtain a secured credit card. To keep your credit limit from being reached, use the card for modest transactions. Your credit score can rise if you pay off the bill each month on time.

Become an Authorized User

If you have a trusted friend or family member with good credit, ask if they can add you as an authorized user on one of their credit cards. Their track record of on-time payments will also benefit your credit report, raising your score.

Apply for a Credit Builder Loan

Credit-builder loans, as the name suggests, are intended to assist in raising or repairing your credit score. Credit-builder loans function somewhat differently from standard loans. They are often offered for sums as high as $1,000 with durations of six to twenty-four months. While you return the loan in predetermined monthly installments, the money you borrow is held in a certificate of deposit or savings account.

The three main consumer credit bureaus receive a report on your payment history as you repay the principal and interest of the credit-builder loan. Paying your bills on time shows that you are responsible with money, and this will raise your credit score. You will get the money in your account once the loan is fully repaid.

Keep Old Accounts Open

The length of your credit history is important. Keeping the account open can benefit your score even if you no longer use an old credit card. Just ensure there are no annual fees associated with it.

Negotiate with Creditors

If you have accounts in collections or charged-off accounts, try negotiating with creditors. In exchange for money, they occasionally might consent to have unfavourable markings removed from your credit record.

And there you have it! Building your credit might seem daunting, but with a little patience and consistency, you can turn things around. Remember, it’s all about making smart financial choices, paying bills on time, and keeping your credit utilization low.

Imperial Automotive LLC offers you the opportunity to buy a car, even if you have a low credit score. Call (601) 402-7950 today to talk to our salesman about the options and terms.