Bad Credit Car Dealerships and Credit
The Ultimate Guide to Rebuilding Credit Through Bad Credit Car Lots
Tired of being blocked for great opportunities by your low credit score?
Maybe you’ve:
? Missed out on a job offer after a background and credit check.
? Got turned down for an apartment because your credit score wasn’t good enough, despite earning enough income to qualify.
? Struggled to find financing for a reliable used car at a traditional dealership.
? Given up on eventually buying your own home.
If any of these remind you of your personal experience, don’t give up just yet. By following the right steps, you could repair your credit score and upgrade your lifestyle all at the same time.
Start By Addressing Your Credit Report Inaccuracies
Your first step toward rebuilding your credit is to dispute any inaccuracies that are on your credit report. If someone stole your identity and racked up bills in your name that were then sent to collections, or if you have other unauthorized debts on your credit report, contact the major credit reporting bureaus - Experian, Equifax, and TransUnion - to have those removed.
Tip: The Federal Trade Commission has outlined steps to take to remove inaccuracies from your credit report. Follow the instructions on their website.
Make a Plan to Pay Off Outstanding Debt
If you have a lot of debt, but not a lot of available credit, your credit score is lower than it could be. By improving your credit utilization ratio - the comparison of how much debt you have and how much credit has been extended to you through credit cards or personal loans - you could improve your credit score.
The most reliable way to improve your credit utilization ratio is to pay down debts. Paying down your debts can increase your credit score several points in just a few months; the more on-time payments you make, the better!
Keep in mind, however, that paying off your debts entirely can temporarily lower your credit score. However, over the long-term, paying your debts back is a much better solution than living with a low credit score.
Buy a Used Car At a Bad Credit Car Dealership
It sounds counterintuitive to look to a used car dealership for bad credit solutions, but taking out another loan could actually improve your credit score. Keep reading to find out what we mean. Don’t take on more debt without understanding some very specific circumstances.
If you need a reliable used car, but your credit score is lower than 675, you could qualify for a bad credit car loan based on your proof of income. Then, with on-time payments to the bad credit car lot, your credit score could increase. In fact, payment history makes up 35% of your credit score, the largest percentage of all factors that affect your score.
Why does this work? These businesses report your timely payments to the major credit bureaus, and regular payments that are not late can improve your score.
Keep in mind that for this to work, you will need to make on-time payments every month or every two weeks, depending on your repayment schedule.
You should also only apply for credit you truly need. In the case of this example, if you truly need a quality used car, this is a fine way to get additional credit. However, don’t apply for a bad credit car loan if you don’t need a car! Every hard credit inquiry can lower your score, as can opening several credit accounts in a short time frame.
Tip: If you don’t have a credit history - perhaps you’ve never had a credit card, for example - a bad credit car loan works in much the same way to build your credit score. With on-time payments, your score could rise and rise.
What Else Should You Know About Building Credit?
Review these fast facts to learn more information that you can put to use to improve your credit situation.
? Certain types of accounts do not build your credit. For example, prepaid debit cards, payday loans, and cash advance smartphone apps don’t help you build credit.
? Rent and utility payments don’t always help you build your credit, although some landlords choose to report your rent payments to the credit bureaus.
? It takes time to build credit, and how quickly your score changes depends on what is on your report. For example, if you’ve filed for bankruptcy in the past, it could stay on your report for up to 10 years.
? Bad credit car dealerships usually run a credit check, but they don’t take your credit score into account when deciding whether to offer you a car loan. Instead, they’ll need to see proof of your monthly income, a government-issued photo ID, and proof of your residence, such as a utility bill in your name or your apartment lease agreement.
If your income doesn’t qualify you for a car loan, you can ask someone to cosign for you. They’ll need to provide the same information when you apply for a bad credit car loan.
