Unfortunately, when you have bad credit, quite often you are starting at below the bottom again to work your way up to improving your credit worthiness.
Here are some tips to assist with improving your credit worthiness.
Tip 1 – Be Realistic
If you have had no other form of credit since your bad credit, you will need to expect that you are not going to be getting the great deals that are in the market. You will be viewed as a higher risk customer and your car loan will most likely be priced accordingly to how bad your credit is or was.
Tip 2 – Be Careful Of Where You Apply For A Loan
Quite often bad credit clients go searching for that better deal and apply to many lenders. Each time you apply, a new credit enquiry is put on your credit file, which lowers your credit score and this can have impact on whether you will obtain approval or not.
If you also think that by applying for a small, short term loan first will actually improve your credit worthiness, think again, as these “pay-day” lender enquiries are viewed in a very negative way, as the lender will believe that you need short term loans to get by with your day-to-day expenses and would feel that giving you a car loan commitment may be stretching your ability to live comfortable from what you already earn.
Speak to someone who specialises in bad credit car loans every day and try to get it right the very first time.
Tip 3 – What You Do With Your Approved Car Loan Once It Is Active
If you have been approved for a bad credit car loan, which would have most likely attracted a higher interest rate, make sure you never miss a payment, and if you can afford to make more than the minimum requirement, do so regularly. This will give you some good credit history which will give you more options the next time you are seeking a loan and improve your credit worthiness.
Tip 4 – Work On Cleaning Up Your Credit File
If you have any unpaid or unsettled adverse history on your credit file, rectify this by any means possible to you. Don’t bury your head in the sand and hope it will go away, as it won’t, and if it gets relisted due to non-settlement, this could put you back another 5 years.
If your adverse history is disputed, take all the legal measures available to have this resolved, as the lender will only accept proof in writing to listen to your side of the story unfortunately.
There also may be options to set up payment plans with any creditors who are listed on your credit file. Make it a priority to clean this up the best you can.
Tip 5 - Start Small With Your Bad Credit Car Loan
It may be better when you are paying a higher interest rate to look for a cheaper car, even if you can afford more in the repayments, use this extra money to make additional payments on your loan, as this will improve your credit history with many other lenders.
By making additional repayments, you are also reducing the amount of interest payable on the loan and by borrowing less, you will also be paying much less interest. If you can afford to do a shorter loan term, this would be another solution to reducing the high interest rate burden.
This loan can be used as a bridge prior to getting the car you wanted with a better interest rate by improving your credit worthiness by conducting this loan above the minimum requirements. You can find more helpful bad credit car loan tips here.