What to Do With Bad Credit Due to Unexpected Events
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Bad credit makes a lot of lenders turn their back on you. Sometimes, unexpected events can occur that turn your world upside down. Inevitably, you can get bad credit overnight due to reasons outside your control. When that happens, getting a car finance loan can become difficult. What is within your control is managing your credit score and there are a few ways to turn things around.
- Secured Credit Cards
If your credit score falls to around 600, you will need to improve it to get better deals on car loans. To do this, you can get a secured credit card. If you can save up $1000, you can make it collateral in a secured deposit account to get the credit card. As you use the credit card and pay the due amounts on time, you should see a consistent improvement of your bad credit score.
- Pay Off Your Debt
Besides the secured credit card, you should always try to reduce your debt. Paying off outstanding debt improves your credit score. Going for just the minimum may not have considerable improvements over your credit report. If possible, save some extra money and pay your smallest debt. Having done this will ensure that you get a better interest rate on a car finance loan.
- Save up for a Larger Down Payment
If you get bad credit due to unexpected events, you may still be able to finance a car. Car finance loans are still obtainable but you will be forced to pay a higher interest. To mitigate this, you can save up for a larger down payment. Something along the lines of 20% will have a positive impact on the interest rate you will be getting. Car finance lenders consider that your ability to offer a higher down payment is a sign that you can pay the loan back, thus reducing the risk for them.