Your credit score plays a pivotal role
in the process of financing your next ride. It determines whether or not you're
able to borrow money from lenders, as well as what types of interest rates you
can lock in for an auto loan. Put simply, your credit score is a numeric
representation of how reliable financers perceive you to be. Credit ratings are
determined by five major factors, some of which are more important than others.
Payment History (35%)
Your payment history is by far the most important element in
determining your credit rating. Payment history includes a record of any late
payments and bankruptcy. These events can lower your credit score.
Amounts Owed (30%)
Lenders also pay attention to how much you owe other people,
since they want to make sure you have sufficient financial means for the new
loan you're applying for. This includes the amounts owed on individual counts.
Lenders will also base their decisions largely on the amount of your credit
line that you're using.
Length of History
(15%)
One particularly frustrating factor for a lot of young
lenders is that your length of credit history has a significant impact on your
rating. If you're new to the credit world, then lenders don't really know if
you're reliable - even if you've paid everything on time. What most
institutions are looking for is long-term consistency, so it's usually best to
try and establish good credit as soon as possible if you haven't already.
New Credit (10%)
This includes new accounts and recent credit inquiries. If a
lender notices that you've been opening a string of accounts, it might be an
indicator that you're strapped for cash. Additionally, some lenders don't like
to give out money until you've established a consistent payment record on your
other accounts.
Types of Credit (10%)
Not all credit is created equal. Revolving credit, like you
get with credit cards, isn't usually as good as installment payments, like you
pay with mortgages. At the very least, lenders want to see variety. So, if you
have only credit cards, you might want to diversify your credit a bit more like
by adding a mortgage.
Contact us at Ginn Chrysler Dodge Jeep® Ram if
you have any more questions about your credit score. You can also stop by to
meet with one of our finance specialists in person.
