Credit Repair Checklist: Rebuilding Your Credit for a Car Loan

Your bad credit score doesn’t have to be bad forever, and having a lower score can mean hitting a snag when trying to get your next car loan. To repair your credit, it helps to have a checklist of things to work on when preparing for your next car loan. Here are five things you can do to rebuild your credit for an auto loan.

1) Ask for copies of your credit reports

Do you know your credit score? Do you know what is reported on your credit reports?

If you don’t, don’t worry. You are entitled to a free copy of each of your credit reports once a week until April 2021 (you can then request a copy every 12 months). You can request a free report from each of the three credit reporting agencies – TransUnion, Equifax and Experian – at

Once you have your reports, review them carefully and see what they contain. If you see errors, you can work to fix them. This is called filing a dispute, and you submit proof that something is incorrectly reported on your credit reports and the credit bureaus will remove the error.

This is a big part of credit repair because even mistakes can hurt your credit score and removing them can help rebuild your credit. There are even credit repair companies that you pay to help you remove inaccuracies from your credit reports. If you are interested in this type of credit repair service, check out our trusted partner.

2) Pay your bills on time

Paying your bills on time can sometimes be easier said than done, but it’s absolutely essential to repairing your credit. Your payment history is the most important factor that makes up your FICO credit score. Remember that a car lender’s primary concern is whether or not the car loan is going to be paid off, so your history of how you have handled previous accounts is also of great importance to them.

A missed or late payment can stay on your credit reports for up to seven years, which is not ideal. The longer a payment is late, the more negative impact it can have on your credit. If you have overdue accounts, try to resolve them as soon as possible.

The good news is that the negative hits to your credit don’t stay there forever – even things like bankruptcies and repossessions. Even if your credit score has many negative accounts or missed payments, if you start working on your credit now, the bad scores will eventually disappear from your reports.

3) Pay off your credit cards

Credit cards are a form of revolving credit, which means you always have a limit on how much you can borrow, and if you do borrow, you owe a minimum monthly payment until that balance is paid off.

When it comes to your credit score, credit cards count towards what’s called your credit utilization rate. This takes into account how much you are allowed to borrow, compared to how much you currently owe on your credit cards.

If you owe more than 30% of your total credit limit, it’s probably hurting your score. This is because the FICO credit scoring model considers a high credit utilization rate as high risk, indicating that the borrower is overburdened and therefore more likely to miss payments.

Most credit experts recommend keeping your credit cards below 30% of their credit limit. Pay off your credit cards as much as you can, and once your balance is reported, it can help improve your credit score.

Your credit cards can also factor into your debt-to-income ratio, which auto lenders look at before considering you for a car loan. If you owe too much on other accounts, a lender may not approve you for an installment loan because too much of your income may be tied to paying off your other debts.

4) Keep old unused accounts open

If you have old credit cards or lines of credit open but aren’t using them, you might think closing them could improve your credit score. In fact, the opposite is true!

Do you remember the credit utilization rate? Closing a credit card account can reduce the amount you’re allowed to borrow, increase your credit utilization rate, and possibly hurt your credit score.

Additionally, there is a factor in the credit scoring model called “length of credit history”, which takes into account the age of all your credit accounts. The longer your account has been open, the better your credit score.

Closing an account can also impact your credit composition, which tracks the variety of credit you have on your reports. So if you only have one credit card and one car loan, closing the credit card can hurt your credit mix and risk lowering your credit score.

5) Apply for new credit in a short period of time

Before applying for new credit, keep in mind that when a lender pulls your credit reports, it may lower your credit score slightly. It’s called a serious inquiry, and it stays on your credit reports for up to two years, but can only impact your credit score for 12 months.

However, if you apply to multiple lenders for the same type of credit within 14 days, only one serious inquiry is reflected on your credit score. This is called tariff shopping.

Once you have your credit score in the range you want, apply for all auto loans within two weeks to lessen the impact of your newly rebuilt credit score.

Ready for your next car loan now?

There are times when waiting for your credit score to return to its glory is just not plausible, and you need a vehicle now. But with a tarnished credit rating, it can be difficult to find a lender willing to work with you. If you have bad credit and need a car loan, contact us at Auto Express Credit.

We have a nationwide network of dealerships who are registered with bad credit car lenders through their special finance departments. To be matched with a dealer in your area, complete our free auto loan application form.

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