What is the best way to finance a car? Credit score is an important tool that must be understood in order to use it wisely. A good credit score can give you access to preferential (lower) interest rates on your credit products, including an auto credit.

AutoStudio 72 explains how to understand, increase and maintain a good credit score.

What Is a Credit Score?

When you have any credit product, your payment behaviors are taken into account and noted by a credit bureau. In Québec, two credit bureaus handle these files: Equifax and Transunion.

Credit score is used by financial institutions and private lenders to evaluate your ability to repay a given amount. Ranging from 300 to 900, the credit score is very important because the higher the score, the better the credit you can access.

What is a good credit score? A good credit score starts at 660. This is generally the minimum credit score for a car loan, although some lenders also offer 2nd or 3rd chance auto credit.

Your credit report is updated monthly. To check your credit rating, contact your financial institution, which can tell you what to do or direct you to the right credit bureau.

What Affects My Credit Rating?

There are many factors that can affect your credit rating. All the loans you have will affect your score positively if they are paid on time.

How to improve your credit score? Among the causes that can influence it, there are:

• The rate of use of your credit card
• The number of years since you opened a credit card
• The number of open cards on your file
• The number of credit applications you have made
• The frequency of your payments and if they are made before the due date...

As you can see, a lot of credit behaviors will weigh in your creditworthiness balance. In the case of financing a used vehicle, the credit score will determine if you qualify for the loan that finances the car you want to drive.

Credit Card: An Ally in Increasing Your Credit Rating

In order to have access to more attractive auto credit deals, maintaining a good credit rating is the key. But before you can access those interest rates sometimes lower, you need to start building your credit history with a credit card.

Since this is money that can easily be borrowed, using it in a responsible way is a good approach to increase your credit score.

How do you increase your credit score? Let’s take a moment to talk about the utilization rate. As mentioned above, it refers to the balance on your card in relation to your total available credit.

For example, a $1,000 balance on a $10,000 card represents a 10% utilization rate. It is recommended that you keep this figure between 20% and 35% of your available credit.

Making your payments every month certainly has a beneficial influence on your credit rating, but to see more interesting gains over time, pay your card on time every month and keep an eye on your usage rate.

Paying your credit card balance in full every month also has a significant impact on your credit rating.

Good Habits to Increase Your Credit Rating

These habits can increase your credit score over the months:

• Keep your utilization rate low
• Diversify your credit (one or two cards, a loan, a line of credit, etc.)
• Settle your minimum payment every month
• Pay off your card(s) balance in full, if possible

The great thing about a credit score is that there are many ways to influence it. Instead of doing everything at once, focus on what’s feasible and check with your dealership for available offers. It’s better to make a minimum payment every month than to do nothing at all!

Thanks to these tips, you can also benefit from the best auto credit deal!

AutoStudio 72, used car dealer in Mirabel on the North Shore of Montréal, just a few minutes from Laval, has the used car for sale you need for your daily commute. Contact us today!