This post contributed by Simon Zhen of MyBankTracker.

Say you’re intent on getting a new car. But maybe you’re worried your financial picture isn’t good enough.

Of course, a good credit score helps, whether you’re leasing a car or taking out an auto loan. But if you want to put yourself in the best possible position to get a new car, there are things you can do to make your credit sparkling clean. See how to get the best deal on your new ride.

Why your credit score matters

Your credit score represents your ability to borrow and repay money. When you lease, you’re technically borrowing a car. And when you take out an auto loan, you’re borrowing funds to purchase a car. But with a good credit score, you increase your chances of qualifying for better lease terms —usually in the form of a lower down payment.

And if you go the buying route, a solid credit score means you’re more likely to be approved for an auto loan. Additionally, you may qualify for lower interest rates. Over the course of the loan, you could save thousands of dollars in total interest paid.

How your credit score is calculated

By understanding the basics of how your credit score is calculated, you can take the necessary steps to improve it (or avoid hurting it).

The FICO credit score is a key scoring model to use because, according to them, it’s used by more than 90% of U.S. lenders.

Here are 5 factors and how much they contribute to your FICO credit score:

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • Credit inquiries (10%)
  • Credit mix (10%)

Payment history is responsible for the bulk of your credit score. Simply put, you want a history of making payments on time.

Amounts owed show how much of your total credit is being used. A commonly-used term is debt utilization ratio, which is calculated by dividing your total debt balances by your total credit limits. Generally, you’d use less than 30% of your borrowing potential.

Length of credit history is the average age of your credit lines. So your score will benefit with credit lines and loans that’ve been opened for a long time. This is the reason why many financial advisors will tell people not to close their first credit card.

Credit inquiries are records on your credit report showing you’ve applied for a new loan or line of credit. Every new loan application will cause a temporary drop in your credit score. If you apply for new loans regularly, too many credit inquiries will look like you’re desperate to borrow.

Credit mix simply represents the different kinds of debt you have. Various types of debt could show you’re able to handle different loans and repayment formats.

5 ways to increase your credit score

Since you want to get a new car as soon as possible, you’ll want to boost your score quickly.

Here are 5 ways you can do so in about 30 to 60 days:

1. Check your credit report and dispute any errors

Incorrect information on your credit profile could contribute to a lower credit score. For example, a credit bureau could’ve mistaken you for another person with the same name and recorded this person’s poor credit history under your credit report. Or, it could be something as small as a late credit card payment that never actually occurred.

Whatever the error may be, it could have a negative impact on your credit score. By disputing these errors and having them removed, you could experience a quick (and big) boost in your credit score.

2. Remove delinquencies

It looks bad when your credit report shows a history of missed payments and credit lines in default.

Whether these delinquencies are still hanging around or not, it’d be wise to ask creditors to remove them from your credit report. This may mean you’ll have to pay off any or part of the debt that’s owed.

3. Request credit limit increases

One of the fastest ways to boost your credit score is to ask existing credit card issuers for a higher credit limit. By increasing your credit limit, you’ll drop your debt utilization ratio. Which means you’ll be using a lower percentage of your borrowing potential.

Note that you may need to agree to a credit check for a credit limit increase. This could cause a drop in your credit score. So you might prefer to withdraw your request to avoid this hit to your credit.

4. Pay down a loan balance significantly

Not surprisingly, showing you’re able to pay off your debt is a sign to auto lenders that you can handle more debt. So pay it down. It’ll help decrease your debt utilization ratio.

5. Avoid applying for new credit and closing existing credit

When you submit an application for a new loan or line of credit, your credit report gets pulled for review. This action will result in a temporary drop in your credit score.

On the other hand, closing a credit line could also result in a dip in your credit score because you lose access to that credit line, which contributes to your total borrowing potential.

Generally, when you know you’re going take out a car loan in the near future, you should avoid these 2 actions until you’ve been approved for the car loan.

It’s worth the wait

If you take the time to improve your financial picture, you just might be able to reduce the total cost of leasing or buying a car. So put in the work to boost your credit now. You’ll be happy you did.


Simon Zhen is a research analyst for MyBankTracker. He’s an expert on consumer banking products, bank innovations, and financial technology. Simon has contributed and/or been quoted in major publications and outlets including Consumer Reports, American Banker, Yahoo Finance, U.S. News & World Report, The Huffington Post, Business Insider, Lifehacker, and

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