Although many car finance options are available for people with poor credit, having good credit not only improves your chances of getting approved but it also gives you more freedom and flexibility A great number of factors affect your credit score, however it’s often hard to keep track of everything you need to watch out for. This is why today we are going to take a little look at how your credit score is calculated, what affects it and how it can be improved.
First of all, let’s take a look at what credit score actually is and how it’s determined. Many people are under the misconception that someone at the bank is sat there going through thousands of documents, to manually calculate a score. This isn’t the case, in fact it couldn’t be further from truth.
You begin building up your credit score, when you first create a bank account. Every time you take out a loan, or any other type of finance, it affects your score. How much you borrow is a factor as well as whether you make regular payments or not. If you miss payments and are not paying any money towards your debt, your credit score will be poor if not bad altogether. On the other hand, if you’re always on time and you pay everything you borrow off, your credit score will likely be good.
Things such as overdraft, car finance, loans and mobile phone contracts are all considered so if you’ve ever missed payments, your credit score was likely affected.
A great number of people ruin their score whilst they’re still young. When you first set up a bank account, you’re more likely to be uninformed about the various consequences that your questionable financial decisions might have.
If your credit score is poor – don’t panic. Although it’s harder to improve your score rather than prevent it from getting bad in the first place, there are many things you can still do to get yourself on the right track.
Your credit cards are the first thing you should take a look at. How many do you currently have? Are you using them all? If you haven’t used them for some time, cancel them as soon as possible. The more credit cards you have, the higher the chances are of your credit score being lower. This is due to the fact that the more finance you have access to, the more likely you are to use it. If you cancel all the cards and close the accounts you’re not using, the bank will see that as an indication that you can probably be trusted because you are being responsible.
Another thing that you’ll want to do is stop applying for any more finance. Many people are under the impression that the more applications you fill out the more likely you are to get approved. This isn’t the case, in fact each time you get refused finance it becomes a part of your credit history. It can make you seem desperate, resulting in finance providers turning you down.
Having all your financial commitments registered at the same address shows stability and is likely to improve your score. It’s extremely simple to do, yet many people don’t even realise that it can have an effect on their credit score.
Finally, if you believe your credit score is too poor for finance providers to take you seriously, consider improving it before you start applying for finance. Sometimes it really is better to wait and have more options available later rather than apply only to get refused.
So there you have it, some simple steps to improve your credit score. If you have ever been refused car finance due to your credit score being poor, don’t be discouraged from trying again in the future. Take some time to improve your score and try again in the near future.
We hope you found our short guide informative and helpful. Be sure to come back soon for more car finance guides and in the meantime, if you have any questions, feel free to get in touch.