Imagine the excitement of finally being able to buy your dream car, only to find out that your car loan application has been declined. This normally happens due to poor credit score. What a bummer, right? So, before even shopping around for a great car financing product, make sure you have excellent credit standing first. There are many ways to improve your credit score in order to get a car loan and we’ll list them one by one.
Timely bills payment
The three main credit bureaus in Australia, Experian, Equifax, and Illion; collect all credit information including the ones provided by the banks and lenders. If you have unpaid credit card bills or overdue home loan repayments, they are forwarded to the credit bureaus. This will be reflected on your credit history. What you can do is catch up on all of your bills, including the mobile phone and utility bills, and start making payments early to drive your credit score up.
Fix errors on your credit file
There are times when the information reported to credit bureaus have errors or inaccurate data. This could also be the reason why your credit score is poor and not eligible for a car loan. To improve your credit score, you must check your credit file and see if all information is correct and updated. Make sure that your contact details are up to date as well.
If you see any error or inaccurate data, notify the credit bureaus right away. If this error is caused by a bank, lender, or any credit provider, you should immediately send a dispute letter with the up-to-date data so your credit information will be corrected right away. With an error-free credit history, the bureaus are likely to give increase your credit score.
Learn more about Aussie’s Bad Credit Car Loans & Finance.
Slow down on new credit
Every time you apply for a new credit card or a personal loan, the bank or lender will send a credit enquiry to Equifax or Experian to check your credit score. All the enquiries will be recorded in your credit history and affect your credit score very badly. So, avoid opening new lines of credit one after another because it will make you less credit-worthy in the eyes of the lenders. By not applying for new credit lines and just working on your existing ones, you can manage your finances better, improve your credit score, and increase your chance of getting a car loan.
Diversify your credit accounts
If you want to open a new line of credit while trying to improve your credit score, do it to diversify your credit accounts (it amounts to 10% of your credit score). Apply for a personal loan or a mortgage, something that you haven’t had yet. Having a credit mix but not going overboard will boost your credit score, as long as you continue making punctual bill payments.
Closeout your debts and loans
Another way of improving your credit score is by paying off your existing loans and debts. Doing this will show the creditors and credit bureaus your capability to close out future loans, which will give you a better chance to get a car loan. It may take some time before this will reflect on your credit report.
Before paying off your existing loans, check with your lender if there’s an early termination fee in your loan contract. If there is, then it’s better to stick with your on-time monthly repayments until the total loan amount is paid complete.
By following these steps, you’ll be able to improve your credit score that will not only give you a higher chance of car loan approval but also a lower interest rate. However, improving your credit score will take some time. It will not happen over a few months, so you need to be patient and continue following the steps mentioned above.
We are currently not taking any new applications as result of COVID-19. We will be keeping a close watch on the situation and will be re-assessing soon.