When you apply for a loan to buy a new car, get a home or even pay for some dental treatments that you need, the creditor will almost always do a credit check on you. This check goes back multiple years and shows any negative reports on your credit like judgments against you, those times you made a payment late and whether you filed for bankruptcy. The creditor will also look at your credit score. A score of below 600 or 650 is a poor or bad credit score. If your score drops, you’ll need to find out how to improve your score before applying for a new loan.
You have the legal right to request a copy of your credit report once a year. When you go over that report, look for anything that doesn’t seem right and anything that shouldn’t be on that report. This can include a credit card you paid off and closed, a credit card in your name that you never opened or a settlement that belongs to someone else. Write a letter to the credit reporting agencies to dispute those transactions. If they cannot find proof of the transaction, they will remove it from your report.
Settle Old Debts
As you look at your credit history, pay special attention to old debts. Depending on your state, those debts will leave your credit report seven to 10 years after the last known activity. That means if you defaulted on a loan and the creditor never did anything to get its money back, that loan will need to come off your report within 10 years. If you have any judgments against you, you can contact the creditors and ask about settling those debts.
Apply for Bad Credit Loans
If you have poor credit and cannot get a loan from a traditional lender, you can still get a car loan with bad credit. Some dealers and creditors specialize in offering bad credit auto loans. The interest rates may be a little higher, or the dealer may ask for a larger down payment from you before giving you one of these loans. Each time you make a payment on time though, you can increase your score by a few points or more and qualify for a better loan later. Improving your credit can help you get a loan with better terms in the future.