By Devin Wilson – Finance Manager
If you’re just building your credit, or your credit has suffered in the past, it can get stressful when you need to buy a new vehicle. Rates are higher and approvals are much more difficult, requiring higher income and larger down payments to get approved. That’s no fun at all.
No Credit or Bad Credit is not where you want to be in this society – but there are steps you can take to increase your credit score and take advantage of the best terms banks will offer you. Below I have listed 10 things you can do to maximize your credit potential. If you have questions or comments please feel free to reach out on social media, or give us a call. We want you to have the best credit possible, so we can get you the best rates possible, so you will buy more cars and trucks from us!
Here we go!
- DO NOT APPLY FOR CREDIT TOO OFTEN. This one is way too common. When shopping for a vehicle people often shop around. That’s both understandable and expected, You should not, however, send in a finance application until you’re sure that you’ve found the vehicle you want. Every time you apply for credit it is called an ‘inquiry’. Too many ‘inquiries’ will drag down your credit score and scare banks away. If you’ve been declined at one or two dealerships already, don’t go to every place in town trying to find a dealership that will accept you. We all work with, mostly, the same banks and the decision making process is in their hands. You’re only doing yourself a disservice by creating more ‘inquiries’.
- LATE BILL PAYMENTS. Obviously, you should try to pay your bills on time. Things come up though, and lenders understand that. Most places will not report a late payment to the credit bureaus if you communicate with them. Call their billing department BEFORE they call you and make a payment arrangement or ask for an extension. In most cases, and you can confirm this with them, they will NOT report your late payment if you’ve reached out to them about it. If you do not, they will report your payment as late and that will have an immediate negative effect on your credit.
- CREDIT CARD BALANCE. This is one of the most common reasons for declined applications. Try to keep your line of credit and credit card balances as low as possible. Easier said than done, I know, but it’s better to have two credit cards with a 50% balance than one at 100%. The technical term for this is ‘Debt to Service Ratio’. When banks assess your application they calculate how much credit you have versus how much you have used. If you have used more than 50% of your available credit, the bank considers your application much riskier and is more likely to decline you, even if you have a high income.
- CREDIT CARD LIMITS. Every 6 months you should call your credit card companies and try to get a limit increase. This will help your credit utilization by improving your ‘Debt to Service’ Ratio. As long as you don’t spend that money!!! Just pretend your credit limit HASN’T been increased and enjoy your improved credit scores.
- FIRST TIME CREDIT. If you’re young, or new to the country, or have been living in a cave since you were a child and have just reintegrated into society, getting your first credit card can be a challenge. A credit card with a good balance (see above) is one of the fastest and most effective ways of boosting your credit score. Talk to your bank about a Secured Credit Card. This will usually require some money from you up front, but is the best way to get started building your credit up.
- CREDIT UNIONS. Lots of small credit unions in Saskatchewan do not report to the credit bureaus. So you will not build a credit rating doing business with them. They can often offer great rates and low fees but keep the above in mind when choosing a banking provider.
- CELL PHONE BILLS. This is here because we see unpaid cell phone bills all the time and they hurt your credit just as bad as missing a car or house payment! Pay your cell phone bills! If you are late or miss a payment make an arrangement! Don’t let your argument with SaskTel or Rogers hurt your chances at getting the best rates possible for your vehicle purchase.
- PAY OFF COLLECTIONS FIRST. They are one of the biggest reasons for higher interest rates on loans. Make them a priority in your debt payment plan and get them gone as fast as possible. The longer they are there, the longer they will affect you. Collections agencies are really happy if you don’t swear at them and hang up, so they are very open to making payment plans that work for you and accepting less than the total amount you owe. Make a deal!
- CHECK YOUR CREDIT. At least once a year you should check your credit. You can do this at your bank for free. It’s good to keep an eye on your score, your inquiries, and your existing credit files. This is also a good chance to watch for any suspicious activity.
- THERE IS NOTHING MORE IMPORTANT THAN YOUR CREDIT. TAKE CARE OF YOURS!
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I hope these tips have given you some insight in to how to maximize your credit potential and I hope that when you’re in the market for a new or used vehicle you will allow us here at Wheaton Chevrolet the opportunity to earn your business! Have a fantastic Autumn.