Most of our modern car shopping experience begins online. Our limitless access to vehicle types, instant quotes, and financing options remove the limited selection found when shopping locally.
What if you were to spend all this time online, but met decline due to bad credit?
This article shares how to prepare (and improve) personal credit for those intending to purchase a vehicle in the coming months. It will also share special considerations and actions one must do to ensure they receive the best deal when signing paperwork.
The Car Shopping Experience: Why Credit Scores Matter and How to Improve Financing
Pulling credit scores is a normal routine for car dealers adamant that their potential clients are reliable and fiscally sound. Yet, the score auto dealers see is different from typical FICO reports.
FICO scores place a high factor on auto loan history which creates an inflated score. The dealer often looks past the inflated score to find a client’s true viability.
How can you improve the chances for a good auto lease or purchase?
Step 1: Work on repairing or building credit
The national FICO score average has reached 700 which places most in the ‘Good credit’ range. Those with fair, poor, or bad credit should consider consolidation if debts are overwhelming as this will lower repayments, making it possible to realign financial responsibility.
Other methods to improve credit scores include:
- Paying (at least) minimum to avoid missed payment marks
- Using a secured credit card to build good credit history
- Avoiding overspending to keep credit utilization low
Begin this credit rebuilding process by obtaining your credit score through annualcreditreport.com.
Step 2: Shop around and set a budget
Begin the (serious) car shopping process by comparing makes and models on platforms like Edmunds.com, Truecar.com, CarMax.com, and AutoTrader.com. Compare the safety and features reports released by independent contractors.
Keep notes about:
- Make, model, year
Use this information (with credit details) to set a budget and explore auto loan options. Explore loan options at https://www.newroadsautoloans.com/ if your credit score is on the lower-end. Be aware an auto loan will file a hard credit inquiry which may change the final score as you’re ready to buy.
Can you afford to wait several months until last years’ models drop in price while your credit score improves? If so, then your car buying options expand greatly because of better financing and budget.
Step 3: Get credit references in check
A credit reference verifies your credit history. The reference is an informal letter detailing your history to a lender or company. Your credit score remains the larger factor in obtaining an auto loan. But, a credit reference may become the document an auto dealer needs to feel at ease and move forward with negotiating and preparing paperwork.
Try the following for credit references:
Verifying financial information will also open the possibility to receive assistance. The choice of an electric vehicle, for example, presents a vehicle tax credit which makes your application highly-attractive to auto dealers as it’s a bonus incentive to complete the transaction.
Negotiation is the Key to the Car Shopping Experience
Negotiation is a critical skill used by savvy shoppers to solidify budget-friendly final invoices and dealer contracts. Negotiation is improved with a higher credit score and competing quotes from several dealers. Research dealers to use as talking points and leverage when counter offering.
Otherwise, consider working with professional vehicle buyers who have your best interest in mind when going into the negotiations.
Work through each step of this post to improve your buying power throughout the car shopping experience. Do so and the half-day you’ll spend with the process will have a fruitful conclusion.