Why is Your Credit Score Important?
A credit score is a numeric rating that ranges from 300 to 850, based on a system developed by the Fair Isaacs Corporation (hence the term “FICO Score”). Although there are multiple factors that determine this score, it is largely based on your payment history. Improving your score increases the likelihood that a bank will lend to you and give you great interest rates.
Cars and Credit Scores
Most cars, whether they are new or used, are purchased through financing. If you plan on borrowing money in order to get a new car, then you will need to let banks and other lenders look at your credit score. Generally, you may borrow from a bank or credit union, through the dealership, or through a private lender. In order to get approved with the best rates possible, keep an eye on your credit. Nevertheless, we here at Haddad Nissan are dedicated to finding you the right car, regardless of your credit history.
Credit Score Breakdown
Your credit is usually issued by three bureaus: TransUnion, Equifax, and Experian. These gather information about you to get an accurate score, a number usually determined by the following:
Your payment history is roughly 35% of your score, which is usually affected by whether or not you pay bills on time. Total debt is roughly 30% of your score, while the duration—or length of credit history—is about 15% of your score. Finally, new credit (10%) is affected by the number of recent credit inquiries and new accounts you’ve opened, while the type of credit (10%) can influence your rating as well (i.e. mortgages vs. credit cards).
Improve Your Score
Paying bills on time is the best thing you can do to up your score, though you should also consider paying off debt as well. Usually, it is better to pay off smaller accounts like credit card debt rather than mortgages or student loans. Many lenders prefer to see that you can pay off long-term loans, so it is often more important to make regular payments for years rather than pay off a long-term loan in large, quick payments. Be aware that loan consolidation can affect your credit negatively as well, though it may make it easier to pay off debt.
Also, check your score for free once a year at www.annualcreditreport.com or call 1-877-322-8228. Notify bureaus of any errors, and keep on top of your score in order to budget better.