5 Ways to Boost Your Credit

5 ways
to boost your credit
and get your new car loan

So you need some pointers on how to get your credit ready for a car loan?
No worries, here are some simple steps to get you smelling that new car smell.

1. Payment History - This includes all current debt as well as payments that have gone into collections and judgements. Achieving a healthy payment history is the simplest way to improve your credit score and also has the most impact. It accounts for about 35% of your credit score so if you have been making payments late, it’s time to get it on track. The good news is that payment history effects your overall score so greatly that it can be relatively easy to bump up your credit score if you just start making payments on time. For those of us who find it challenging to organize payments, find a system that is automated. You can use your digital calendar on your phone, a banking bill pay account, or even set an alarm. Find a system that works for you. If you have a friend that is great at paying bills on time, ask them what they do.  

2. Credit Balances - Managing your credit balance is the second most important thing to consider while trying to impact your credit score. It accounts for 30% of your rating. Your score is calculated using the total amount of debt you have, how close you are to your credit limit, and if you have been able to pay down your loan installments early. Your FICO score considers both credit cards and loans. When considering your total debt amount related to your credit score, remember that even if you pay off multiple credit cards every month, your FICO score reflects the balance your lender reports to the credit bureau. This is generally the balance of your last statement. So, if you are using credit cards monthly for convenience and not necessity, consider changing this practice to make your debt reflect a lower amount while trying to boost your credit and qualify for a car loan. This will also increase your ability to get a larger loan for that vehicle your are seeking to finance because you are using less of your max credit. Individuals who are close to maxing out their credit limit are a higher risk for lenders than those who are not and your score considers how much you still owe of the installment on a loan. If you pay down your installment early, this is a good sign to lenders that you can manage your debt. A good rule of thumb is to stay below 30% of your available credit card limit.

3. Credit History Length - Fifteen percent of your credit score is based on the length of your credit accounts. Sometimes having a short credit history can’t be helped, but many times there are missed opportunities. For example, if you have a credit account that has been open for years and you have not utilized it, many credit companys will automatically close your account. Make sure that you use your credit account at least once a year to keep the length of your credit history strong.

4. Credit Mix - Your FICO score will be higher if you can demonstrate an ability to manage different types of credit lines such as a car loan, mortgage, and credit card. This doesn’t mean that you should go out and open new credit that is not needed, but it is something to keep in mind while managing debt.

5. New Credit - The remaining 10% of your credit score is based on your new credit accounts.Opening several credit accounts at one time can be a flag for lenders, especially if you have a short credit history. If you are planning on getting a car loan, make sure not to open new credit accounts during this time.


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