Why Is Having Good Credit Important When Buying a Car?
Have you tried to open a new credit card, secure an auto loan, or get a new mortgage, only to be met resistance every step of the way? Part of the reason you haven’t had as much success getting the rates you need is your low credit score.
Though it seems common knowledge that a good credit score is desirable, many men and women don’t fully understand how much a bad credit score can negatively impact their lives. If you are unsure how a poor credit score can negatively affect your daily life, we can help shine some light on it!
The Drawbacks to Having a Low Credit Score
Bad credit history does more than impact your ability to secure a mortgage — it also sends a message to financial institutions that you’re a riskier borrower, making it more challenging to secure any type of loan. From an auto loan for a new car to a student loan to help you continue your education, you will be expected to pay a higher interest rate as a type of insurance to the financial institution.
Banks aren’t the only ones inspecting your credit score. More and more apartment managers and landlords check tenants’ credit reports before deciding to rent to them. Credit card companies also use your credit score to determine how much credit to extend when you apply for a card.
Poor credit scores don’t only increase your interest rates — they can even prevent you from getting approved from the get-go. If your score is too low, some institutions may reject you immediately. Additionally, some job seekers have even reported that they were asked by hiring managers for permission to view their credit reports. This could mean that your credit score may even affect how easy it is to find your next job.
Why Should I Try to Build My Credit Score?
Just like there are downsides to having bad credit, there are an endless number of benefits that you’ll gain after you increase your credit score. One of the biggest reasons people work to raise their credit score is that you can access lower interest rates on things like auto loans, business loans, and mortgages when you have a higher score.
Improved credit scores help open a wider range of possibilities for people. They get access to better credit cards, mortgage rates, and more that they didn’t before after taking the time to rebuild their credit the right way.
How Do I Build My Credit Score?
People who have practiced poor credit habits in the past may not know how to properly build their credit. Having a clear plan to help develop better credit habits and improve your score is imperative. So how does someone who hasn’t had a good credit role model know how to rebuild their credit?
You build better credit by consistently paying your loans back on time, which shows business owners and lenders that you’re a reliable borrower who isn’t likely to run into a financial situation that would force you to stop paying off your loans.
If you have a low credit score, you have options available that can help you improve your score. You should ensure that your credit card bills and loans are being paid on time; your payment history determines an estimated 35 percent of your FICO score.
Paying more than the minimum balance, avoiding excess credit inquiries, and better budgeting can improve your score over time. Additionally, programs like PA Auto Credit’s buy here, pay here in Philadelphia, PA , can potentially help you build up your score with regular on-time payments.
The Benefits of Raising Your Credit Score
Reliable borrowers have a wider network of financial institutions willing to work with them, which means these banks and lenders need to offer lower interest rates to stay competitive. Though a few points shaved off your interest rate might not seem like a big deal, it can equal out to hundreds or even thousands of dollars saved by the time you finish making payments on your loan.
Maintaining a great credit score makes it easier to find and secure housing. As discussed before, apartment managers and landlords often check credit scores when considering which applicants to choose for a space. When you have a higher credit score, your application is seen as more competitive, which can help you have your pick of apartments when you move or look for new housing.
Another interesting benefit of raising your credit score? You’ll actually pay less for your car insurance. If you have a higher credit score, you are statistically less likely to file a fraudulent insurance claim. Though car insurance companies can’t check your credit in every state, Pennsylvania’s major insurance companies still use credit to determine what you’ll pay for your coverage.
Come to PA Auto Credit for Your Bad Credit Car Loan Needs!
Is bad credit getting in the way of the auto loan rates you need? The PA Auto Credit team is here to help! Call us today for more information on our bad credit car loans in Philadelphia, PA .