Learn About Important Factors That Can Lower and RAISE Your Credit Score.
Credit Guidelines are used when determining the quality of your credit by auto lending institutions for the purpose of decisioning your loan application request for approval or decline.
Your loan requirements and lending stipulations will vary depending on the lender chosen and your overall credit profile. Qualification for a loan is solely determined by the auto loan product offered by the lender you are applying to. Each lender has specific underwriting guidelines regarding auto loan financing, so you should not assume to receive the same decision from different financial institutions.
Credit scores are not the only thing that banks look at when making a credit decision on yoru auto loan application. In addition to your credit rating as obtained from national credit bureaus, auto loan lenders use additional information you provide on your application for credit. This additional information could add to or subtract from your actual credit bureau score. Even when you are approved, terms and conditions of auto loans will vary from lender to lender.
If you have been rejected for credit, it is suggested that you wait for 6 months before reapplying. During that period of time, clean up your credit report for any discrepancies, and bring all of your credit payments current, maintaining that status through the time you would consider reapplying for credit.
An alternative to credit rejection is to add a person with an established good credit history to act as your co-applicant. The co-applicant promises to pay if you don’t and can thus improve your changes of being approved.
What You Should Know About Your Credit Score
Credit scores are based on information in your personal credit record. The majority of Credit Scores range from 350 to 850. The higher the score the better your chances of being approved for a lower interest auto, mortgage or personal loan. However, this may not be the case for credit card offers. You must read each individual credit card offer and weigh the alternatives. Of course the higher your credit score is the better your chances are of being eligible for the best credit card loan offers.
You can constantly improve your credit score by making all your payments in a timely manner, and for credit card purchases, keeping your balance down below 50% of the credit limit amount.
When additional information (such as income, monthly payments, job and residence history) is supplied on an auto, mortgage, or personal loan application it will be important in determining whether or not you can get the best offer.
Factors That Can LOWER Your Credit Score
* Too Many Credit Applications
When was the last time you applied for credit? Do you respond to every credit card offer that is mailed to you with a “pre-approval”? Too many credit applications will definitely lower your credit score. Each time you apply for credit, your credit report is pulled by the online lender you are applying through. Too many inquiries on your credit report will hurt your chances of acquiring a good loan. There is a rule of thumb thought to be used, that if you are searching out an installment loan for the best offer, such as an auto loan, mortgage loan, or personal line of credit, multiple credit inquires for the same purpose to ultimately only acquire one loan within a two week period will not affect your credit score. However, if you are applying for every credit card, with each one potentially giving you a credit limit it will count separately for scoring purposes. Multiple credit applications makes it hard for the lender to determine whether you are applying “in search of the best offer” or trying to obtain auto credit because of financial trouble, thereby using credit to help you out of your short cash flow situation.
* Inconsistent Payment History
Missing or late payments is a negative factor. The older the missing or late payments are, the better your chances for approval. If you have not missed or paid any monthly payments late recently, lenders may think you have resolved your payment problem and you are presently showing more responsibility. Lenders will weigh current on time payments with a higher regard when making their decision on your auto loan application. They normally look at payment history over a 6-12 month course. Missing payments on only a few accounts is not as harmful as missing payments on most or all of your accounts. Missing several consecutive payments on any or all outstanding accounts puts the lending institution(s) on alert that you may never repay those accounts. The monetary balance of the outstanding account is also a factor when missed or late payments are judged for lending purposes.
* Too Much Credit Reliability
High balances are a negative factor with the exception for some types of installment loans such as auto loans, mortgage loans or personal loans. High balances on credit cards send a red light to the financial institution decisioning your auto loan that you are living beyond your means and may not be able to repay them on a timely basis. Lenders evaluate how much you owe in debt in relation to how much you earn in income. While high credit card balances can be a negative factor, so can never using your credit cards. Unused credit does not provide information to potential lending institutions about how you would typically use credit and repay your debts. Also, if you have a lot of unused credit available to you, the lender could perceive that you may decide to use it if you experience financial trouble. Credit card balances above 50% of your credit limit is usually considered negative, because lenders perceive that you may be using more credit that you can reasonably afford to repay. Being at your maximum available assigned credit limit on a credit card is especially negative. The more accounts in this situation, the more it impacts your credit score.
Factors That Can RAISE Your Credit Score
* Quality Credit Applications
If you have not applied for credit within the last 6 months this will help give you a higher credit score. When you apply for an auto loan your credit history is checked by the lender(s) considering your application, and it is stated on your credit report as an inquiry for credit. Auto loan lenders dislike seeing many inquiries within a short period of time. To keep your highest score try to limit your comparison shopping to a small number, and use willpower against multiple credit card offers that could come pouring in.
* Credit Accounts In Good Standing
Having credit accounts is a positive factor. An auto loan, past or present and a mortgage commitment when paid on a timely basis are excellent ways to keep your credit score higher. Credit card accounts when they are in proper alignment with the 50% or lower account balance to credit limit available is a positive factor. Credit gives the lending institution information to evaluate how you pay your bills.
* Consistent Payment History
To raise your credit score and keep your score high make all your credit payments on time each and every month.