It’s hard to overstate the importance of a good credit score. After all, they are the main factor that lenders use when determining whether or not you are a good candidate for a loan. But your credit score is important for reasons beyond borrowing. A good credit score can help you score a better apartment, get you better rates on car insurance, and more. But how much do you really know about your credit score, and what questions should you be asking?
Credit refers to any agreement where a borrower receives money from another person or institution with the understanding that they will repay the money, usually with interest. When people talk about credit, they are referencing their credit history, which is a record of their credit usage.
A credit score is a number that indicates to lenders their capacity to repay a loan. A credit score is between 300–850 and indicates a consumer's creditworthiness. The higher the score, the more likely a person is deemed to pay back their loan.
Credit scores take into account five different factors in your credit history. Each factor is weighted differently. The factors are:
Every month different agencies will voluntarily send information to credit bureaus. These agencies typically include banks, credit unions, retail credit card companies, mortgage companies, car loan lenders, and debt collectors. These companies will share:
Additionally, credit bureaus also purchase public records from public records providers. These include liens, court judgements, and bankruptcy filings.
The best way to know if you have good credit is to simply check your credit score. There are many sites that will allow you to check your credit score for free, so it’s a good idea to monitor it regularly. Additionally, you should check your credit report at least once a year (but we recommend reviewing it three times).
Credit bureaus will allow you to access your credit report once per year for free and without it affecting your credit score. If you do this once every four months at each of the three bureaus, you will be able to effectively monitor your credit.
Your credit score will follow into one of five categories, which will indicate the health of your credit score.
When you are able to review your credit report there are several things you should look for. Your report is broken down into four sections that you should review.
If you notice any errors to the credit agency as soon as possible. They will look into the matter within 30 days. If they do not comply they will be in contempt of the Fair Credit Reporting Act.
There are many benefits of having good credit, and in general it will make your financial life much easier. These benefits include:
There is no magic number credit score when it comes to refinancing your car. But car loan refinance is much more beneficial when your credit score is in good shape.
The car loan APR you are offered will be based on a few factors:
Your credit score is the factor that you will have the most control over. The better your credit score is the lower the car loan APR you will be offered. The best rates are reserved for those with the best credit, so taking the time to improve your credit score is well worth it.
People commonly wonder if refinancing hurts credit score. And while it will affect your credit score slightly, the benefits of refinancing a car will far outweigh any slight dips that it may cause in your score.
Refinancing a car loan affects two parts of your credit score, your history length and your new credit. Opening a new account, it will shorten your credit history length. It will also count as a new credit and the hard inquiries will be noted in your credit report. But both of these will only cause slight dips in your score, and hard inquiries only affect your credit score for about a year.
But the benefits of refinancing a car loan can really help your credit score. If you are having trouble making your monthly payments, refinancing to a longer repayment period can lower your monthly payments and make your monthly budget more manageable. This means that you will be able to more consistently make payments (on all of your accounts, not just your car loan). And that can really bump your payment history section, which is the most influential section of your credit report.
Refinancing to a lower car loan APR can also loosen up more money in your wallet so that you can pay down other debts, which will also improve your credit score.
If you are interested in refinancing a car loan it is a good idea to work on your credit score before applying. This will give you the best chance to be offered good terms and a good car loan APR. There are a few steps you can take to ensure your credit score is in its best shape before you apply.
There is no quick way to improve your credit score. It will take time and commitment, but it will be worth it for you in the long run.
Building a great credit score takes time, but it’s incredibly important to your long term financial success. Better interest rates, easier approvals, and more peace of mind are waiting for you on the other side.
Refinancing a car loan is a great step to helping your credit score. While you want your score to be in great shape before applying for refinance, keep in mind that it can help you improve your score too by loosening up some money every month.
If you are thinking about refinancing your car loan, contact Auto Approve today! Our experts can help guide you through the refinancing process and help you start saving money immediately.
So don’t wait, contact Auto Approve today to get started!