Dec 14, 2024 / Auto & RV
Your credit score plays a big role in securing an auto loan. It’s your ticket to better rates, lower payments, and long-term savings. But if your credit score isn’t sparkling, don’t sweat it! Not only can you get an auto loan no matter your credit type with certain lenders, but there are also plenty of practical ways to give your score a boost and lock in a better deal on your next ride or refinance.
Whether you’re building from scratch or bouncing back, the steps below can help you steer your credit in the right direction.
Before you start working on your credit score, it’s helpful to know the factors you’re working with. Your credit score is based on five metrics:
Knowing these factors can help you focus on what moves the needle for you the most.
Credit bureaus make mistakes, too, and errors on your report can wrongly bring down your score. The good news is you can check your credit report for free once a year at AnnualCreditReport.com. You never know what might pop up. Start by reviewing your credit report for mistakes like incorrect account details or outdated negative items and disputing them ASAP so they can be corrected. This might just give your score the instant lift it deserves!
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Payment history is the single biggest factor in your credit score. Even one missed or late payment can put a dent in your credit. So if you’re behind on payments, it’s a good idea to catch up as soon as possible to minimize the damage. Then, focus on maintaining a consistently on-time payment record moving forward.
You can also set up reminders or even automate payments so you don’t have to think about upcoming due dates! As a Utah First member, you’ll have access to our Digital Banking platform, which lets you schedule automatic payments on a browser or mobile app from anywhere, anytime.
Your credit utilization ratio is the percentage of your available credit you’re using. When you use a portion of your available credit but leave some breathing room, it shows lenders you’re in control of your finances. On the other hand, maxing out credit cards or using a high percentage of your limit makes you look reliant on borrowed money — which makes lenders more cautious.
To improve your score, keep your utilization below 30%. Using your card regularly can help you build a solid credit history if you pay down your balances regularly. The goal isn’t to avoid using your card but to use it wisely. Here’s how:
Lower utilization shows lenders that you use and manage credit responsibly.
Even though you might not use that old credit card you opened back in college, it’s still helping you today — so don’t close the account! The longer your accounts stay open, the better it is for your credit history. Old accounts show lenders you have long-term experience managing credit.
When you close old accounts, it looks like you haven’t had credit as long and increases your overall utilization, which can hurt your score. So, unless you’re struggling with responsible credit usage, keep your oldest cards open and in good standing to help your score over time.
Applying for new credit isn’t bad, but too many applications at once can hurt your loan approval chances. Every application triggers a hard inquiry on your credit report and can slightly lower your score. If you’re about to apply for a car loan, avoid stacking up other applications in the weeks leading up to it. Keeping your credit profile stable can improve your chances of approval.
Lenders like variety. Having a mix of credit types — like a credit card, an auto loan, and a mortgage — is a great way to show your ability to handle different credit types and boost your score. If you’ve only used one type of credit, consider adding another, like a credit card or small personal loan. Don’t do it just for the sake of it, though. Only take on new debt if it fits with your financial goals!
Debt can hurt your credit score, but with the right repayment strategy, you’ll be debt-free again in no time. Here are two tried-and-true methods that can help you pay down your balances:
Whichever method you choose, paying down debt helps lower your credit utilization and boosts your score, making it easier to qualify for better loan terms.
The secret to credit improvement is patient consistency. Improving your credit score takes time! You might see quick fixes like error disputes have an immediate effect, but most changes take months of responsible financial habits to make a real impact. Stay consistent, watch your score, and you’ll see the payoff in the long run!
And if you’re a Utah First member, we make it even easier to stay on top of your credit with our Credit Intelligence feature in Digital Banking. Gain access to real-time credit scores, timely notifications, and personalized insights to help you boost your credit health. Get alerts about changes, tackle potential issues before they become problems, and take control of your credit journey — all in one place.
A higher credit score means lower interest rates and savings on your car loan. It’s that simple! For example, someone with A+ credit may qualify for an interest rate that’s several percentage points lower than someone with D credit. Over the life of the loan, this can translate to hundreds or even thousands in savings. A little effort now could mean more car (and more money in your pocket) later, so take the time to improve your score before applying for a car loan.
Boosting your credit score might take some time and a little work, but the benefits are worth it. Follow the tips above, and you’ll be on the path to better finances and getting a better ride for your cash!
At Utah First, we’re committed to your financial success. Whether you need debt management tips or help breaking down your credit report, our team is here to help you understand and improve your credit so we can set you up with an affordable car loan. And with personalized loan options and competitive rates, we make it easy to get behind the wheel!
Chat with a financial expert today to learn more about our car loan services and how we can support your financial journey.