Having a good credit score impacts all of your credit-based purchases. Whether your looking to get a mortgage, a personal loan or a car loan, you can be certain that the lower your credit score, the higher your interest rate will be on future loans. Don’t fear, because even if you have bad credit now, there are many ways you can improve that score and attain a better loan.
What Issues Can Lead to a Poor Credit Score in the First Place?
These three factors can play a huge role in affecting your credit score negatively and thus impact the kind of car loan that you receive. If you’re confused as to why your credit score is in the dumps, it’s possible that you fall under one of these three categories.
A recent bankruptcy will definitely impact your credit score. But don't worry, as there are many car dealers that have loan programs especially for those who have filed bankruptcy or have credit issues. Dealerships work hard to get around the barriers people face who have filed bankruptcy, so if you’ve been in this situation, know there is a way to obtain future car financing.
2) A failure to pay bills on time
One of the most common ways people damage their credit score is by missing or skipping payments. If you commit to a loan or a big credit card payment, you need to be certain that you’ll be able to pay the loan back on time. If you have recurring missed payments, your credit score will drop and you run the risk of having items repossessed. Any future lenders will see that you’ve missed payments in the past and will see you as a high-risk borrower. This will either cause them to reject your future loan applications or approve them with high-interest rates.
3) Being out of touch
Creditors want to know your situation, regardless of what it is. If you suddenly drop off the face of the earth this will surely negatively impact your credit score. It doesn’t hurt to use your credit card at the grocery store every so often and pay the bill immediately just to show you’re active.
What Can You Do to Improve Your Credit Score?
Tip #1 - Stay On Top of Your Bills
Paying your bills on time needs to be a priority every month. Make sure that before you commit to a loan or using your credit card, you’ll have the means to repay on time. If for whatever reason you’re not able to make a payment, contact your creditors to see if you can arrange some sort of deferred payment or alternate credit plan, but don’t make a habit of this.
Tip #2 - Buy a Car and Make Your Monthly Payments
A car payment is often the largest single payment for most people outside of rent or a mortgage. As a result, credit agencies are very pleased when they see that you have purchased a car and are keeping up with the payments. If you consistently make your payments in full and on time your credit score will no doubt increase.
Tip #3 - Realize That Your Credit Score is Dynamic and Changes Quickly
Making payments on time will change your credit score quickly. Many Canadians fail to realize just how quickly they can change their credit score by adopting different financial habits and approaches.
If you’re looking to get pre-approved for a car loan, check out our rates page to see our lender’s rates across Canada! Once you’ve seen the rates, complete our short application below and begin the journey of getting a car!