How To Guard Your Credit Score Against Auto Loan Mistakes
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A lot of Arizona consumers have found that car ownership is unavoidable and expensive. It’s easy to finance a vehicle that you think you can afford only to be overwhelmed by your monthly payments. The truth is that too many Arizona car buyers don’t realize how much they’ll be paying in interest charges. They may also forget to set aside money in their budgets for cost of ownership expenses. These include fuel, auto insurance, maintenance work, and repairs. Often, Arizonians who already have bad credit miss a car payment or two. They may even default on their loan, and end up having their vehicle repossessed. This just makes their bad credit worse. Repossession also leaves them with fees that they can’t pay and a lack of transportation. However, with careful planning and realistic expectations, you can finance the car you need without blowing your budget or ruining your credit score.

Should Arizonians with Low Credit Scores Finance their Vehicle Purchases?

One surefire way to avoid going into debt over a car purchase in Arizona is to buy an inexpensive vehicle outright with cash. This will also allow you to avoid the high interest rates that come with bad credit auto loans. Yet, there are three reasons why buying a cheaper car with cash may not be the best idea.

  • While it won’t hurt your credit score, paying for a vehicle with cash won’t do anything to help it either. You have to use credit in order to build good credit. So, yes, taking out an auto loan means taking on debt, but it will also give you a chance to improve your credit score. Making your monthly car payment on time every month will earn you a better credit score over time.
  • Spending a large chunk of cash on a vehicle may leave you with little or no money to save for emergency expenses. It’s always good to have cash set aside for unexpected needs, and even more so if you have a car to maintain.
  • Speaking of car maintenance, buying a cheaper vehicle with cash from a private seller could set you up for a mountain of expensive repair bills. Sure, you might get lucky with a great deal on a good car, but it’s a real gamble. After all, you’re just as likely to end up with a vehicle that breaks down frequently and causes you to miss work. Suddenly, your “great deal” won’t be much of a bargain.

So, Arizonians with low credit scores shouldn’t rule out auto financing. They should, however, finance with caution, stay within their budgets, and have a backup plan in case things don’t go as expected.

How to Manage an Auto Loan in Arizona without Destroying Your Credit

According to the Federal Reserve Bank of New York, one in 26 car loans were more than 90 days late in the first quarter of 2017. As an Arizona consumer with transportation needs, this shouldn’t scare you out of financing a good and reliable vehicle. What this statistic should do, though, is alert you to the fact that you’ll need to exercise caution.

Here are three things to do or think about before buying a car that should help you stay out of trouble down the road:

  • Check your credit reports and credit score. Even if you’re pretty sure that your credit is damaged, you’ll want to know exactly where you stand before applying for any type of loan. This way, you won’t get stuck with a high interest rate that you don’t deserve. This will also give you a chance to find and dispute errors on your credit reports. Having these inaccuracies removed should give your credit score an immediate boost.
  • Stick to your budget when looking at car options. If you have a lower credit score and a smaller budget, recent model used vehicles are typically the best options. This is especially true if you need a bigger car to accommodate a larger family. If, on the other hand, you’re a single driver who doesn’t require a lot of room, a brand new compact or subcompact vehicle might fit into your price range.
  • Be able to provide a decent down payment. Putting cash up front on your car purchase will allow you to take out a smaller loan. This will enable you to pay less in interest charges over the loan term and should make your monthly payments more manageable.

Keeping up with your Car Payments is the Key

Finally, after you’ve purchased your car, it’s important to meet your payment due date on time, every month. This is the only way to protect your credit score and avoid repossession. If something does come up, like a job loss or sudden illness, and you suddenly can’t make your car payment, you’ll need to take action quickly. Your best bet will be to call your lender and explain your situation. Most auto loan providers are willing to work with borrowers who are honest and upfront about their problems. Your lender might be willing to defer your payments for a while or extend your loan term in order to reduce your monthly payments.

How to Instantly Increase Your Credit Score to Buy a Car in Arizona

Many Arizona consumers don’t know that, according to the Fair and Accurate Credit Transactions Act (FACTA), you’re entitled to a free copy of your credit report from each of the major credit bureaus every twelve months. If you go to www.annualcreditreport.com, you can conveniently request credit reports from TransUnion, Experian, and Equifax by filling out one form.

While carefully going through all credit reports, look for inaccurate dates, unfamiliar accounts, and other types of mistakes. If you find any errors, you can send written disputes to the credit bureau(s) on your own OR you can get a FREE credit repair lawyer to help you through the entire process.

The Free and Legal way to Get Better Credit

Don’t let errors on your credit reports bring your credit score down. At Arizona Credit Lawyers, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in settled cases. This is why our clients pay nothing for the work we do.

Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (248) 353-2882 or you can send an email through our Contact Us page.