Tuesday, October 9, 2012

How Guaranteed Car Finance Could Actually Help Improve Your Credit Rating

Did you know that if you have a poor credit rating, getting car finance can actually help improve your rating considerably, allowing you more financial freedom in future? It often seems like a catch 22 situation - you have a low credit rating, and can't get credit, yet having credit helps improve your rating.

Not everyone appreciates that having car finance, a car loan or other credit arrangement can help improve your credit worthiness in the eyes of most lending institutions. You might be forgiven for thinking that having credit will lower your rating, since it's obvious you already have existing commitments.

Although it's certainly true that if you have a huge mountain of active credit agreements, loans, store cards and credit cards, your chances of getting car finance or any other form of credit or finance are low, but this is only in cases where the number of credit arrangements is excessively high. The most important point is that those credit arrangements demonstrate payments being made regularly, on time and in full.

As long as this is the case, then your credit rating will still be good, and you stand a good chance of getting the car finance, car loan or credit you need. But what if you do have missed payments, defaults, even CCJs or arrears on your mortgage?

Certainly getting car finance can prove much harder in such cases, and you may already be in the situation where you have applied for cars on finance or car credit finance, and been declined. It's not a good feeling being declined for car loans, and these days it seems to take very little to knock your credit rating down. The economy has been bad, and credit companies have become very much more conservative, with the result that missed or late payments get punished harshly, the letters being sent out worded more forcefully, and patience seems thin on the ground.

But if you can get car finance, then you will be able to help start to rebuild your credit worthiness. Although your credit history may show missed payments, late payments or other problems in the past, you may now find yourself in a much more stable situation, with either those arrangements paid off, or agreements in place.

But unless you're prepared to wait six years for your missed payments, defaults and CCJs to automatically clear from your credit history, how else can you repair the damage caused? The answer is simple - get credit, and start paying it off on time. You'd be surprised the difference it makes to your credit rating having a car finance arrangement which demonstrates that you are paying on time, in full, every month.

As long as you keep up the payments, your credit rating will improve every month, cancelling out much of the damage caused in the past, and helping you to get back on track much sooner than the six years it would otherwise take. But this still brings us to the same problem it would seem - how do you get the car finance that's likely to improve your credit rating if your credit rating is already a disaster?

The answer is to use guaranteed car finance. Perhaps you have heard of guaranteed car finance arrangements - they're car finance deals for those with poor credit ratings, or no credit history at all. Rather than using your credit history to judge whether you'll be able to pay the monthly instalments they assess your income and expenditure as it currently stands. As long as you have enough income to pay the monthly payments, you'll be guaranteed car finance.

This means that you can afford to buy a new car, as well as improving your credit rating. It's essential to make sure of two things though. Firstly, you absolutely must keep up the repayments, otherwise the improvements to your credit rating will be lost. Secondly, make sure that you approach a car finance company which allows you to use your guaranteed car finance to buy any car, from any dealer, rather than being forced to choose one of their own cars.

With just a single phone call it really is possible to get yourself a new car of your choice and improve your credit rating all in one go.

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