Credit Score Check Up

Assess your credit health before you apply for a car loan.

by Spero Financial

Many would-be borrowers don’t know their own FICO score before they apply for car loan financing, and even fewer have an in-depth knowledge of the details of their credit report. 

Checking your credit report doesn’t have to be scary, and improving your credit score doesn’t have to be difficult. Our quick tips can have powerful, positive effects on your credit score, and the amount you end up paying for car loan financing, especially if you combine them.

5 Tips to Improve Your Credit Score

1. Knowledge is power.

Go to and get your free credit report. Immediately! You can’t fix problems that you don’t know about. Once you have your report, go over the details and make sure everything is correct before you apply for an auto loan. Are there debts that you’ve paid off still listed? Are all of your credit card limits correct? Contact each credit reporting agency to erase any errors from your report. Contact your credit card companies and collection agencies to negotiate the removal of older, negative marks so that your report reflects your current financial progress, not your past financial mistakes.

2. It’s all in the mix.

If you have just one credit card, or one type of credit, try opening a different kind of account for a modest bump in your FICO score. For example, you could finance a small purchase, such as a new refrigerator or a new couch. Be sure that you have enough money to completely pay for the item within the “same as cash” timeframe, though. These financing deals are not beneficial if you have to start paying interest.

3. Test the limits.

The best way to make a big impact on your credit score in a hurry is to decrease your credit utilization ratio, or the amount of available credit you’re using. You can do this by paying down your credit card balances and by increasing your credit card limits, either by opening a new card, asking for higher limits on the cards you already own, or both. Don’t open up several new cards at once, as this makes you look like a credit risk. Opening one new card, though, is likely to raise your score. If you keep your credit utilization ratio below 30%, you’ll see an appreciable increase in your credit score. Get your ratio down to 10% or less to max out this portion of your credit score.

4. Keep ‘good debt’ around.

Many borrowers mistakenly believe that they should remove old debts and close old credit cards as soon as they get them paid off. If you have a paid off credit card, keep the account open. Closing old credit accounts damages your score in two ways, by decreasing your overall credit limit and making your credit history look younger than it is.

5. Think balance, not balances.

Let’s say you’re carrying $1500 of credit card debt, split up into a couple of hundred dollars on four or five cards. One final quick tip to improve your credit is to transfer all of your small credit card balances to one card before applying for an auto loan. Even though the amount of money you owe remains the same, carrying it all on one card looks better on your credit report. In addition to your credit utilization ratio, lending institutions look at the number of credit cards you own that carry balances. If you opened up one new card with a low introductory APR to increase your available credit, transfer to this card to save on interest as well.

Good money management is all about being proactive and leveraging your assets. Don’t jeopardize your financial future because you’re too afraid or too overwhelmed to face your current circumstances. If you need help, get some professionals on your side. We are rooting for you; we are invested in your long-term prosperity, and are available every weekday to offer a listening ear to help you reach your financial goals.

This material is for educational purposes only and is not intended to provide specific advice or recommendations for any individual.

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