Will Your Credit Get You That Car?

We live in a credit-based economy with fewer and fewer of our purchases coming directly out of our pockets. For that reason, our credit worthiness becomes more and more important. Do you know if your credit good enough to buy you the car you want?

What is a credit score?

Over the years, credit reporting agencies have developed a system of predicting your credit-worthiness based on your past payment history. Based on the score they give you, these agencies will recommend whether to give you credit or not to buy that car or home or to make you that loan. How much you owe and to whom and how timely you make those payments will determine your final score. Each agency has its own scoring system, but they are using the same information and will arrive at the same basic conclusion regarding your credit worthiness. Once you apply for credit, the lender will go to one of these agencies for your score.

How do I get my credit score?

You can call or go online directly to one of the major credit reporting agencies, and for a fee (under $10) get your current score. The three major agencies are Equifax, Experian, and Trans Union. Depending upon your bank, you may be able to get your credit score from your banker without charge.

How can I raise my score?

You probably won’t be able to raise your score immediately. But, there are ways to improve your score. Credit reporting agencies base their scores on how much credit you have outstanding and how you have been paying it off. So, to improve your standing, you can start by paying off outstanding debt. If you are at the top of your credit limit on your credit cards, paying down your balance is a good move. Paying off some of your cards completely will reduce the number of creditors you have - also a good step to take. If you have outstanding accounts with finance companies, you may want to pay them off since credit agencies do not like to see them on your record. The longer your credit history, the better it is. So, you may want to take the time to establish a credit history of at least six months before applying for additional credit. And finally, your record marks each time your credit is checked. These credit checks add up and are then used to lower your score. So, limit any new applications for credit until you are ready to buy that car.