Do you know what your credit score is? If you’ve never applied for a finance package before or it’s been a while since you’ve taken out a credit card or mobile phone contract, then you may not be aware of what your credit score is. It’s not something we think about day-to-day, unless you are especially financially minded.
But if you are thinking about taking out any sort of finance product - from something big like a mortgage to something smaller like spreading the cost of a new domestic appliance – your credit score will affect the types of finance available to you and the interest rate you are charged.
So it’s in your best interests to, not only know what your credit score is, but also improve it as much as you can. Did you know that you can improve your credit score by applying for car finance?
Your credit score works as a record of your financial history stored on files that are kept by credit check agencies. They basically take a look at things like your traceability (e.g. address history), and any black marks (such as defaults and county court judgements) to evaluate you as a potential customer.
But aside from having a traceable, clean financial history, one thing these credit check agencies will do is look at any finance packages you have taken out in the past. Why? To see if you were able to pay off the package without any issues.
Your credit score is, in essence, how much of a risk you are as a customer. The higher your score, the less likely you are going to have difficulty making the repayments. That means lenders will offer you a better, more attractive product and interest rate to secure you as a customer.
If you’ve been able to take out a finance package and pay it off in the past, then you will have demonstrated that you are a good customer. This might seem unfair if you’ve been careful financially all your life, but have just never taken out a finance product. Whatever your circumstances, taking out a finance package and paying it off on time is one of the most effective ways to improve your credit score.
Car finance is a bigger payment than almost every other kind of finance package than a mortgage, so paying it off will show you can handle a sizeable finance deal without any difficulties.
Taking out a car finance package and paying it off on time with no missed payments will demonstrate your reliability as a customer. If you have a fair to average credit rating and can still afford to take out a car finance deal, then you’ll be able to take advantage of car finance to spread the cost of your car, and end up being able to get a better product when the time comes to finance your next car.
Applying for too many finance products in a short space of time can be frowned upon. These applications are recorded on your credit file and so it can appear that you are ‘desperate’ for a finance package, meaning you might be in financial issues not apparent on your credit file.
Before you apply for any finance package, check your credit score. Use online tools to work out what deals you are eligible for, and only apply for those packages that you qualify for. That way applying won’t affect your credit score, and you’ll get the benefit from the improved credit rating once the package has been finished.