We understand that (in most circumstances) it’s unavoidable to pursue bad credit car loans. To a variety of different reasons, you may find that your credit score isn’t in the best of shape. In this case, you’ll have a tough time securing financing on your impending vehicle purchase, in which case you’ll have to opt for bad credit car loans.
Nowadays, these dealerships and lenders offer tolerable terms, although they’re far from ideal. In most scenarios, you won’t have an alternative, meaning you’ll probably be committing to some nasty (and potentially debilitating) financing rates. This will only make your credit situation even worse.
While you may have to opt for a bad credit car loan right now, it doesn’t have to be that way forever. Below, we’ve provided some simple tips to improve your overall credit score. That way, when you’re shopping for a new car in several years, you won’t have to worry about your credit score getting in the way.
Make Your Payments on Time
Well, this is rather obvious, right? However, many consumers will be surprised to hear how much those missed payments can actually influence their credit score.
For starters, let’s just review the basics. Completing your payments on time will have a positive influence on your credit score. But when you are missing or have late payments, those will make your credit score go down. Ultimately, creditors use the past to predict the future, so a subpar resume of past payments will have a significant influence on your future credit standings. Specifically, if a dealership sees that you’re unable to complete your monthly payments, do you think they’re going to be providing you with advantageous financing rates? Instead, they’re going to offer financing rates that could be crippling.
Furthermore, many consumers assume that their credit score is only influenced by their payments on their credit cards or loans. That isn’t the case. Your ability or inability to pay your rent, utilities, or any other random bills on time can also influence your future score. Ultimately, any payments you’re responsible for will surely show up in your credit history. Keep that in mind the next time you decide to wait a few days to complete an impending payment.
Furthermore, you’ll be exasperating your declining credit score if you continue to miss any timely payments. In other words, it’s in your best interest to pay off your missed payments as soon as possible. Avoiding those missed payments will only lead to more negative repercussions on your credit report.
And to be clear: resolving these missed payments won’t suddenly boost your credit score. However, creditors generally look at payments from the past seven years, and they value the most recent payments over older payments. Therefore, if you’re currently struggling to make ends meet when it comes to monthly payments, you can rest easy knowing that it won’t have a negative influence on your score for the rest of your life.
Find a Resolution
Are you still struggling to complete those payments on time? Several solutions can temporarily remedy your monetary issues.
For starters, if it’s your inability to remember the deadline for your monthly payments that’s been hurting your credit, you could surely activate some kind of automatic-payment function. That way, the money will automatically be deducted from your bank account every month, thus eliminating your responsibility to log into your account and make the payment.
You could also approach the lender about refinancing or reconfiguring your monthly payments. Ultimately, many of these businesses want their money, and they’re not overly concerned with the monthly total. If you have difficulty paying a certain amount every month, approach the company and see if you could lower the total. There’s a good chance that they’ll be just as receptive to the proposition.
Make Sure You’re Getting “Credit” For Every Monthly Payment
As we previously mentioned, it’s not only those loan payments that influence your credit score. All of those ancillary monthly payments, including phone and television, will also have a negative influence on your credit score if they’re not made in time.
Unfortunately, the same can’t be said if those payments are made in time. If you’re paying those phone payments on time, they won’t influence your credit score unless you start to make late payments.
You can rely on some services that will recognize these payments as positive impacts on your credit score. Simply, the services will depend on your bank payments, and they’ll identify any utility payments as credit influencers.
That way, if you’re making those cell phone and cable payments on time, they can end up improving your credit score. While these completed payments won’t have the same weight of your more traditional credit transactions, they’ll still help to dig you out of that hole.
Pay Off That Debt
There’s a highly-touted credit strategy that suggests consumers should focus on one particular payment at a time (without neglecting those only monthly payments). Once you’ve completed one source of debt, you can allocate that money to another one of your obligations. Eventually, you’ll only have one payment to worry about, and all the while you’ll be able to improve your overall credit score.
This is a useful strategy regardless of your credit situation, but it can be especially useful if you’re looking to improve your overall score. Paying off your debts has a large influence on your overall credit score, and keeping those balances low is also useful. Overall, it’s important to remember your credit ratio. Refer to your maximum (monthly) credit limit, and then calculate how much of that money is allocated to debts. If that percentage is below 30%, you should see significant improvements to your overall credit score.
Manage Those Cards
It can be enticing to sign up for that brand-new credit card, especially if some kind of perk accompanies the sign-up. I’m admittedly guilty of opting for several new cards so I can acquire one of those breathtaking jerseys from the many ballparks I’ve visited.
Predictably, this isn’t very good for your credit report. Applying for multiple cards – even if you never intend on using them – can negatively influence your credit score. Furthermore, when applying for these cards, you’ll be granting companies the ability to make hard credit inquiries on your report, which does have a negative influence on your overall score. In other words, if you don’t need a new credit card, don’t sign up.
Similarly, there’s no benefit to closing your credit card account, unless you have a neurotic compulsive spender on your hands. Closing an account can decrease that credit score that you’re already struggling with to even lower unfavorable levels. Unless there’s some kind of accompanying fee that’s worth ducking, there’s no reason to close that unused account.
Ultimately, it comes down to some common sense and savvy money management. Before long, you’ll find that your credit score is climbing, and this will have a victorious impact on many future purposes.
If you start to take some of these pointers and putting them into your monthly bills, your credit will slowly begin to improve. That improved credit score means you might not have to opt for that bad credit car loan, which will save you significant money during the lifespan of your car.