Your credit score is a reflection of the way you handle your finances, and it's always changing. There are many ways to fix your credit score, but you need to know why your credit looks the way it does first.
There are many steps that can be taken to fix your credit score if it's suffering. But credit isn't one size fits all, so, before you dive into trying anything, be sure you know why your credit looks the way it does. This way, you can take the proper steps to fix your credit score more quickly.
What Makes Up You Credit?
Your credit score isn't just a random number that someone makes up for you. It's a reflection of the way you handle your finances, and it's always changing. When it comes to buying a car, most lenders look at your auto-enhanced FICO score when they're determining approval.
Your FICO credit score is a three-digit number between 300 and 850 - the higher the number, the better your score. To get that number, your FICO score is broken down into five categories, each one making up a percentage of your total score. The five factors that make up your FICO credit score are:
Your payment history tells the lender how you've paid on all of your accounts for the past seven years. From this, lenders can tell if you're always making payments late, which brings down your score, or if a recent missed payment has stained an otherwise good record. Amounts owed mainly concerns how much of your available credit you're using. It's expressed as a percentage called a credit utilization ratio, and lenders like it to be below 30 percent.
Next comes your credit history. This shows lenders how long you've been using credit. Your credit reports show what types of credit accounts you have open (installment or revolving), how long they've been open, and how recently you used them.
Credit mix and inquiries make up the smallest percentages of your FICO credit score. Credit mix tells how well balanced your credit is between installment credit, such as a car loan, and revolving credit, such as credit cards, while inquiries let a lender know how often you apply for new credit.
Knowing Your Credit Score and Reports
In order to work on the parts of your score that are dragging it down, you need to know what's in your credit reports, and what you credit score is. You can get a free copy of your credit reports once every . 12 months from each of the three national credit bureaus: TransUnion, Experian, and Equifax. These can be requested by visiting www.annualcreditreport.com.
You may need to pay a fee to get your scores at the same time, or you can look them up for free from a number of online services (although it won't be your auto-enhanced score). Also, keep in mind that not all credit bureaus use the FICO scoring model, so your credit score could differ depending on the bureau you get it from.
Tips to Fix Poor Credit
Once you have your credit reports, you can focus on the areas that need improvement. Here are five tips to improve your credit, by factor:
Ready to Start Building Your Credit?
If you're ready to improve your credit score and get the vehicle you need, a car loan can be a great tool. Auto financing can add an installment loan to your credit mix, plus each timely payment helps build a positive payment history. But, if you worry a poor credit score is standing in the way of a car loan, you shouldn't run all over town looking for a lender.
Instead, let Auto Masters of Murfreesboro get you going in the right direction. We are available to help people who are struggling with bad credit, no credit, and even bankruptcy. Don't hesitate any longer! Fill out our online car loan request form, and we'll begin the process of finding the right vehicle to fit your needs and your budget.
Charles Higgins has been in the automotive industry now for over 17 years. He has built a career by helping people with unique credit situations get financing. Charles believes everyone deserves the chance to build their credit while driving a reliable vehicle. Contact Charles today for your all of your credit needs.