Trying to buy a car with bad credit can seem like an uphill battle. A bad credit auto loan can give you more options, providing you with the funding you need despite your spotty credit history and ensuring that you get reasonable rates to make your new car affordable.
Improving your credit even a little bit can help you get better rates on all types of loans, making your car more affordable and giving you more purchasing options. In order to focus your efforts for maximum impact, you need to learn what things are reported to your credit and how much influence they have.
By knowing the things that don’t affect your credit score, you can shift your focus to paying off the accounts that will lower your score and give your more financing options.
Here are 10 things that (perhaps surprisingly) don’t affect your credit score:
When you apply for car insurance, life insurance, health insurance, homeowner’s insurance or any other type of insurance, the company will likely run a credit report on you to determine your ability to make prompt payments. However, if you make a late payment or skip a payment after the policy has started, the insurance company cannot report that to the credit bureau.
The only exception here is if your account becomes delinquent and the insurance company turns your account over to a collections agency. Any collections activity will show up on your credit report, but simply making late payments or missing a payment here or there for your insurance policy will not.
Utilities and Phone Service
Just like with your insurance, you may have to undergo a credit check to get approved for utilities such as electricity or water, as well as for phone service. And just like with your insurance, your payment history for utilities and phone service is not reported to the credit bureau.
Again, don’t let your account become delinquent. If it gets turned over to a collections agency, that will show up as a black mark on your credit report.
Medical bills are considered unsecured debt, and they are not reported to the credit bureaus. You could have thousands of dollars in medical debt, but it won’t show up on your credit report unless you enter into a financing plan or you let the account go into collections.
Your rental history is on record for future landlords to look up when you apply for a new apartment or rental home. However, your rental history is not part of your credit report. Unlike a mortgage, you don’t take out any loan when you rent a home or apartment. You only sign a contract, and a contractual breach is not something that gets reported to your credit.
If you let your rent fall so far behind that you are evicted, this can show up on your credit report. So don’t worry if you make a late payment, but don’t let your payments fall behind.
The only exception to your rental payments showing up on your credit report is if your landlord uses Experian RentBureau. These payments can positively influence your credit score with the Experian bureau.
Child Support and Alimony
You may face serious legal consequences if you don’t pay your child support or alimony on time, but you won’t have to worry about your credit score taking a hit. Like with other financial responsibilities, you can find yourself in bigger trouble if you fall so far behind that the account has been turned over to a collections agency. Any time any account goes into collection, it will appear on your credit report.
Having a higher income can certainly help you buy a car with bad credit. You can get more favorable terms on your loan and you can make a higher down payment, which can further bring down your interest rate.
However, your income does not influence your credit score. No matter how high or low your income, your score will not fluctuate and your income will never appear on your credit report.
Your age will also not appear on your credit report. Lenders may understand you to be young if you have a short credit history, but they will never see your exact age on your report. So long as you are a legal adult who has the ability to enter into a contract, you also cannot be discriminated against for financing based on your age.
Your other creditors will never know if you are paying 29.99 percent interest on a credit card of have a mortgage with a 10 percent interest rate. The rates you pay are between you and your creditors alone, and they will never appear on your credit report. The only information that will appear is the amount you owe or the amount you have available (such as your credit limit), the age of the account, and whether you have made timely payments.
If you have ever found yourself in over your head and debt and sought out credit counseling, that will not count against you. The credit problems will negatively affect your report, but the counseling will not.
Credit counseling may appear on your credit history, but it does not count against your score. The only way that credit counseling can hurt you is if the agency is not making payments on your behalf on time.
Self Credit Checks
You should check your credit report and score at least once a year to make sure your report is accurate and to check in on the health of your credit. Though too many inquiries from creditors can count against your score, checking your own credit history does not.
To clean up your credit, you need to focus on the big things like credit card accounts, mortgages and car loans. Once you have a positive history with these accounts, you’ll start to see a significant improvement in your credit score and you’ll get more favorable financing terms.
Until then, you can still buy a car with bad credit by getting the right bad credit auto loan.