How to Build or Establish Credit
How to Build or Establish Credit in Memphis, TN
Buying a car is a significant investment. And, more often than not, customers will take out loans to finance their purchase. However, when your credit score is less than ideal, sometimes qualifying for a loan can be difficult. And if you do qualify, sometimes the interest rate you're given is particularly high, making your payments harder to manage.
Here at Chuck Hutton Toyota, we make it our mission to help our customers in any way possible. And that includes through education. That's why we've outlined a few ways to help rebuild your credit after bankruptcy, a loan default, late payments, evictions—what have you. You don't have to be held back by financial mishaps of the past, so find out how you can get on the road to recovery!
What goes into a credit report?
Your credit score is crucial to determining what kind of interest rate you'll end up with. Scores range from 300 to 850, and scores above 700 generally guarantee a lower interest rate. This number is calculated on your credit history, which could include things like late payments on car loans or credit cards as well as how long you've had your financial accounts.
Not everyone has a top-tier credit score. And it's not always due to poor financial decisions. Plenty of things can get in the way, such as the loss of a job or unexpected medical bills. Whether you're building up your credit after graduating from college or trying to rebuild your credit after a financial whirlwind, there are solutions to you.
Building your credit.
Establish your price range
If your credit score isn't ideal, then be prepared for a somewhat higher interest rate on your loan. But if you buy a vehicle that's a little bit under your desired price range, you'll find that it's much easier to keep up with your monthly payments. Determine what your payments will be with a higher interest ahead of time and then plan accordingly. It never hurts to be safe!
Keep up with your payments
Pay early and chip away at your loan's balance by paying slightly more than the minimum required payment each month. You can even pay off your loan early if you're able to! This will end up improving your credit score, which could mean that when you buy your next car, you could qualify for a lower interest rate.
Find a co-signer
Especially for first-time car buyers or customers who haven't established a line of credit before, finding a co-signer for your loan is a great way to qualify for a loan. It gives the dealership, bank or credit union you'll be financing with more confidence that their loan will be repaid on time and in full.
Buy a new vehicle
No, this isn't just a marketing ploy. The same thing applies to any purchase that requires financing. When you take out a loan on a new car or open a new line of credit, you're creating new information that will be factored into your credit score. If you stay on top of your payments, you'll be on your way to rebuilding or establishing a solid credit score.
Making the purchase
When you buy a new vehicle, regardless of your credit history, there are a few documents you'll need to bring along with you to the dealership.
1. Proof of income
This usually includes pay stubs from the last month as well as what you've been paid to-date in the past year.
2. Credit and banking history
You'll want to provide information about other outstanding loans or financial obligations you may have, as well as how you've fared in the past financially. This could include mortgage or lease agreements, alimony or child support payments, credit card statements or bank statements.
3. Proof of residence
Personalized mail or mortgage statements are usually enough to provide reasonable proof of residence.
4. Proof of insurance
Your lender will require proof that your insurance company is aware of the newly-purchased vehicle and that it's properly insured.
If you're financing with a bank or credit union, you'll also want to bring along proof of your loan.
If you'd like to learn more, contact us today or stop by our dealership at 4601 Hutton Way, Memphis, TN 38116. We look forward to serving our customers near Southaven, Whitehaven and the Goodman Road Area.