When you buy a car, the lenders will look at your credit history and your credit score. A bad credit history or a low score might prevent you from being able to buy the car of your dreams. But this can be remedied with a few simple tips geared towards improving your credit score.
If you have been looking for cars for sale in the North West and surrounds, the chances are that you have been asked about your credit history by the car dealerships in the North West. This is because lenders need to ascertain whether to not you are a high-risk client. This will have a hand in their decision to approve your loan or not. Below is some handy advice on improving your credit score before you go car shopping.
Correct any mistakes on your credit report
A credit report will give you a complete breakdown of how you have used your credit card, and it will provide you with your credit rating. You will need to review this report carefully and be on the lookout for any errors in your details and monthly installations.
Before you start looking for used cars in the North West, you will need to ensure that all the details on this report are correct. If you have made a payment recently but it is not reflecting on the report, you will need to question this. And if your personal information is incorrect, you will need to rectify this. Once the report is correct, you can continue your search for used cars for sale in the North West and apply for car finance once you find the right car for your needs.
Always pay on time
This should be a no-brainer. Paying all bills on time can help to improve your credit score significantly, and will show the lender that you are a reliable and financially-responsible person. If you can pay all of your repayments before the due date, this will also help to improve your credit rating.
You should ensure that you can afford the interest on your credit card. If you cannot, go and speak to your bank about lowering your limit so that you are able to repay it without eating too much into your salary and savings. If you are likely to forget about repaying your bills, set a reminder on your phone for a day or two after payday or you can schedule a payment on your bank app or website so the money is taken off immediately.
Don’t have more than one credit card
It might be tempting to have more than one credit card so that you can afford some of life’s little luxuries (new shoes and bags for Christmas anyone?) but you should actively avoid having more than one credit card.
The idea of dividing your debt between two or three credit cards could prohibit you from a car loan approval for second-hand cars in the North West or anywhere else. This is because it does not show fiscal responsibility and you might be seen as a high-risk client. It will also put you into more debt than you can realistically afford each month. You should rather stick to one credit card and use this to pay for emergency situations.
Pay more than the prescribed amount
One effective way to boost your credit rating is to pay in more than the prescribed amount. This way, you will repay the card sooner rather than later and this will reflect well on your credit history. It might seem expensive at first, but you will soon pay it off.
Paying double the amount is not necessary, simply paying an extra R50 can help significantly. You can speak to a financial adviser and ask them for a realistic amount to repay each month based off of your financial situation. This way, you will know exactly how much you can afford each month without having to come up with your own guesstimate.
Don’t close paid off accounts immediately
This might sound counterintuitive, but closing an account you have paid off straight away could actually harm your credit score. Instead, you should keep it open, lower your limit and use it only for items that you truly need, such as baby food and nappies for a new little bundle of joy or a bed for a new apartment.
Doing the above is one easy and effective way to raise your credit rating before buying a car. It will show the dealer that you are able to repay your debts and handle money responsibly and your credit rating will improve. But, if you feel as though you will be too tempted to spend more money on your card, it might be a good idea to close it and stick to using your cheque or debit account to pay for things.