You’ve decided that it’s time for a new car. You’ve chosen the car based on needs or wants, and have made the decision to go for style, functionality, or both. You know the amount of passengers you’d like your car to carry and the driving conditions you’ll likely encounter. You know the distance of your commute to work and back.
You might say you’ve done your homework—up to a certain point. At the dealership, they’ll likely run a credit check to make a lending decision. This is what’s called a hard inquiry. And hard inquiries can impact your credit score and remain on your credit report for up to two years.
Your Credit Can Determine the Lending Decision
Your credit score can play a major role in determining the lending decision—and ultimately the type of car you can afford. This is one of the reason why financial and credit experts place emphasis on how to use your credit the right way, like not maxing out your credit card(s), paying your bills on time, and avoiding new credit card purchases—which can raise your credit utilization rate. Your credit utilization rate is the ratio between your credit card balances and your credit card limit. The higher your balances, the more likely your credit score will be affected.
Good credit is more likely to help lock you into a favorable loan rate, while giving you a wider choice of vehicles from which to choose.
Here’s how to keep your credit score in good driving condition:
Practicing the above steps should have a possible effect on your credit score over time. The better your credit score, the more likely you’ll get favorable financing terms.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.