Sell Junk Car And Utilize The Money For Timely Repayment To Have A Sound Credit Score

| May 13, 2014

Credit score is the key to obtaining different loans and debt. The three major credit bureaus in the country provide free credit reports annually. While applying for any loan, you need to submit a credit report or lenders seek the same and assess the payment history, length of the credit report, the nature of the debts that you gave taken and the likewise. Any sort of purchases and transaction is reflected in the credit history and also affects the same. On the other hand, the credit scores also have an effect on the loans as the rate of interest and the loan term solely depends on it.

Importance of credit history assessment

Your credit score and the application of car loan are interrelated. This is because the approval of the loan depends on the credit score. The various factors that affect the credit score are assessed and weighed and are then granted a loan. For instance, if the credit history of the applicant is small then they will be approved of a high rate of interest. A long history gives a glimpse of the financial condition and pattern of the applicant. Thus, applicants need to make sure that the credit score is impacted positively by making monthly payments.

Effect of car loan on score

On the other hand, the car loan also has an effect on the credit history of a person. With every application of credit you make, there is a reduction in the credit score by few points. Whenever you apply for any loan, there is an inquiry on the application regarding the score. This reflects the lender has assessed the credit score and that also your desperation for loan. For the car loans, a grace period is awarded, and inquiry within that period might not affect the credit score. After this period, various several inquiry of credit core is considered to be one application than many.

Avoid missing due dates

The repayment of loans also affects the credit score. After you have negotiated with the lender and finalized the rate of interest. Loan term and other details, you need to mention the same in the contract. You need to stick to the payment plan so that you can avoid missing the due dates of the same. The credit score largely depends on the timely payment of the existing loan. With timely repayment, you can improve bad credit and achieve good credit that you can help you to obtain a loan in the future.

Inquiry for refinances hits hard

Often the car-owners opt for refinancing to fund their new car. As part of the approval of the refinancing process, the lenders conduct an inquiry to ensure that you are an eligible candidate for a loan. This inquiry is considered to be a hard one and has an adverse effect on the credit score. As per the rules, any form of a hard inquiry, reduces the credit score by few points and also stays in the report for the consecutive two years. If you want to improve the credit score, then you can sell junk car and utilize the money to pay off different loans and debts on time.

Stick to repayment plan

If you have applied for a car loan and if the same has been approved then the credit score will be affected, till the payment of the full amount. While assessing the credit history the lenders can notice a drop in the score due to a recent loan or debt. If you have a poor score, with immediate and timely payment, you can revive the same. If you skip a payment, that is if you fail to pay within sixty days of the due date, it can also have an effect on the score. Make sure that you stick to the payment plan for a sound credit score.

Author Bio: Dale Smith is a financial advisor and he understands the importance of credit score. In his recent blog, he has written about interrelation of credit score and car loans. He recommends sell junk car to stick to the payment plan.



Category: Credit

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