If you’re planning to buy your first car, you’re probably wondering how to improve your credit score so you can get the best interest rate possible. Here are some tips to help you out:
Check your credit report for errors
The first step is to check your credit report for any errors. If you find any, dispute them with the credit bureau.
Make all your payments on time
One of the biggest factors in your credit score is your payment history. So make sure you’re always making your payments on time, including your rent, utilities, and credit card bills.
Keep your balances low
Another factor in your credit score is your credit utilization ratio, which is your credit card balances divided by your credit limits. To keep your score high, keep your balances low.
Use a mix of credit
Lenders like to see a mix of different types of credit, such as revolving credit (like credit cards) and installment credit (like car loans). So if you have both types of credit, it can help your score.
Keep old accounts open
Closing old credit accounts can actually hurt your score, so it’s best to keep them open.
Get a secured credit card
If you have bad credit, a secured credit card can help you rebuild your credit. With a secured card, you deposit money into a savings account, and that deposit is your credit limit.
Become an authorized user
If you have a friend or family member with good credit, you can become an authorized user on their credit card. This can help you improve your credit score.
Use a credit-builder loan
A credit-builder loan is a loan where the money you borrow is deposited into a savings account. Once you repay the loan, you have the money in the account, plus interest. This can help you build up your credit history.
Get a co-signer
If you can’t get approved for a loan on your own, you can get someone to co-sign for you. This means they’re responsible for the loan if you don’t repay it.
Wait for your score to improve
If you have bad credit, it can take time to improve your score. So if you can, wait a few months or even a year before you apply for a loan.
Following these tips can help you improve your credit score so you can get a better interest rate when you’re ready to buy your first car.