Tips to Improve Your Credit Score

1. Credit Utilization:  If you have credit cards, be sure to pay them in a timely manner and start working to reduce the outstanding balance.  One of the factors that makes up your credit score is credit utilization.  Experts say a good number is to utilize less than 30% of your available credit.  Lenders a leery when seeing high credit utilization, especially if they see credit cards where the highest balance outstanding at any time has exceeded the cards limit.  If you have paid your credit card company on time, one option may be to ask them to consider raising your credit limit.  Don't go out and spend more, still try, and reduce the balance but a higher limit will lower the utilization rate if you don't increase the balance from its current amount.  This factor, credit utilization, is the second biggest factor to one's individual credit score.
2. Authorized User:  If you have a family member or friend that has a credit card with a high limit and a great record of paying on time, ask them if they will add you as an authorized user. The credit card holder doesn't have to let you use the card, would probably want to hold onto the card and not give you the number, but many credit card issuers will report the primary card holders credit history to your account also, just have them check before adding you.  Of course, the downside, if something happens to them and they run into payment issues, this will also reflect on your credit history you have been working to rebuild.
3. Pay on Time:  Be sure to pay your bills on time, don't wait to the last minute and have a late payment show up on your account.  These late payments will stay on your credit reports for up to seven (7) years!  Your history of paying bills on time is the biggest factor in FICO credit scoring formulas.
4. Collection Accounts:  If you have legitimate collection accounts make a plan to pay these off.  You may be able to persuade the collection agency to stop reporting the debt once you pay it off or settle the amount for less than was owed.  You will need to discuss this with them prior to paying off any legitimate collection balance.  You can also remove collections accounts from your credit reports if they aren't accurate or are too old to be listed.
5. Dispute Errors:  You should get a copy of your credit report from each of the three (3) major credit repositories.  If you live in Vermont, you are allowed to order one free copy from each of the credit repositories every 12 months.  You can access your free credit report at:  Annual Credit Report.com- Home Page.  Once you have a copy of each report, take the time to study it, make notes of any errors and be sure to dispute credit items that are incorrect.  Though it may not have any material bearing on your credit score, you should look to correct errors with items like your home address or phone numbers.  Having your credit file match what you put on a credit application will help instill confidence with a lender and can cut down on the amount of documentation you may need to provide when finalizing a loan.  Errors happen more than you might think, so you need to be diligent and check for errors that reflect negatively on your credit every year. Maybe you have very old information that needs to be removed. Errors happen, so you should be aware of these potential mistakes and get them corrected in a timely manner.
6. Experian Boost:  Experian, one of the three (3) major credit repositories, offers a product called "Experian Boost" This service links your bank accounts to the free Boost service.  Once they are linked the system scans your bank accounts for payments to streaming services, phone, and utility bills as well as eligible rent payments. You choose which payments you want added to your Experian credit report.  This will only have a bearing on Experian's scoring model and not on the other two credit repositories but can help.  Your credit score will almost never be the same with all three credit repositories, sometimes a higher score on one will allow a lender to make a loan, this might be the difference if you have a good history of paying these types of charges and your Experian score is higher than what is provided to the lender by the other bureaus.  More information can be found at Experian Boost.

Keep in mind that if you have derogatory credit or a poor credit rating it is a good idea to approach a used car purchase by looking at something affordable and that is at a price point that will put you in the best loan to value position possible.  Lenders a more comfortable approving a used car loan that results in a lower financed balance, with a payment that doesn't overextend you, making it difficult to make your monthly payment.  Don't forget the loan to value equation, many times we see customers looking for the cheapest used car, thinking that will help them get a loan.

Look at these examples:   If the bank's loan value is only $6500 and you are looking at a $9000 car, you are asking them to finance almost 140% of the car's value, assuming you pay your tax and registration fees and don't put any money down.  This type of structure is a sure-fire way to hear "Declined".  A better bet would be a vehicle that the dealership can sell for $15,000 but has a bank loan value of only $13750.  Again, assuming the loan is for the vehicle only and you are not trying to finance tax and registration fees, you are now only asking them to finance 90% of the purchase price.  Now that scenario will make more sense to most lenders.  Of course, cash down or a trade equity are always good and can change the loan to value equation in a positive way,

If your dream vehicle is a full-size four-wheel drive pickup or SUV, you may want to strongly consider starting out with a less expensive used car loan on a sedan or compact SUV.  This will result in a more affordable monthly payment, allowing you to improve your credit score with timely payments.   After you have established a good history of paying on time, then you can consider moving up to your dream vehicle.  Chances are you could qualify for a larger loan with a better interest rate and terms, provided you have been up to date on your payments.

Our finance team at Central Vermont Auto Mart specializes in helping customers find a used car for sale on our lot that will hopefully work for both you and a potential lender.  We sell used cars and provide financing options at our dealership, located at 365 River Street, Montpelier Vermont.   Members of our staff have been working with banks for over 20 years and have built up relationships with them that help get deals done.  Stop by, let our team help or drop us note letting us know how we can help you.