Recovering From Low Credit Scores

A small chalkboard that says 'credit repair' is shown.

Has a low score got you down? Buying and financing a new vehicle can be stressful enough, but if you face the uncertainty of financing and are dealing with a subpar credit score, you might be second-guessing yourself and your options.


However, if you need a car ASAP, it's important to know that there are plenty of dealers that provide financing options—such as the two-party trust program here at Paradise Motors, a buy here pay here near Owosso, MI—and dealerships like ours are more than willing to work with drivers from all different credit backgrounds, including those with low credit or even no credit at all.


Maybe you've looked into auto loan options in the past, or maybe you've just been avoiding thinking about it altogether; whatever the reason for putting off looking for a vehicle, you should know that you don't have to carry around a bad credit score forever.


Whether you're a seasoned buyer or a new driver, things like auto loan financing and credit scores can be confusing. They can vary from person to person, and certain dealers won't lend to drivers with a low credit score, thus limiting your options. But we're here to tell you that you do have options, and there are many highly-rated local dealerships with experience working with drivers who need a little help.

A woman is shown sitting in the driver's seat of a vehicle during a test drive at a dealer that does buy here pay here near Owosso, MI.  

A Closer Look at Credit Scores


A credit score is something everyone has, even if it's zero. If you're unfamiliar with credit ratings or how they add up, no worries; we're here to lay it out plain and simple.


So what is a credit score? This number tells the lender what kind of borrower you are. Depending on where you fall on the credit scale—which ranges from between 300 and 850—you could have anything from "poor," "fair," "good," "very good," and "exceptional" credit.


Around 21% of borrowers fall within the "good" rating, which is between 670 and 739. Plenty of borrowers have credit scores below that. If your credit score is between 300 and 579, this would be considered "poor" credit; around 16% of Americans are within this category. At the same time, 17% have a credit score that is "fair" or between 580 and 669. The lower your number, the more lenders consider you a bad investment.


You might be wondering at what point you are disqualified from a loan. The great news is that, despite a poor score, there are financing options available for you. It's all a matter of terms and finding a willing lender. The lower your credit score, the higher the interest rates on your loan may be; this is because the lender is taking more of a risk in giving you a loan, and the high-interest rate helps make it less of a gamble for lenders because they know they'll be making back their investment quicker, on the off-chance you decide to stop making payments.


How Can I Improve My Score?


Now that you're aware of credit scores and what they mean, it's a good idea to have yours checked if you haven't already done so. However, if you're disappointed to learn that your credit rating is lower than you like, there are lots of small steps you can do every day to improve your credit rating.


If you want to get an auto loan with lower interest and you're not in a hurry, you can change your credit score beforehand—but you have to remember it won't happen overnight. It's important to stay on track and remember that, with each bill paid on time and each paycheck earned, you are slowly moving your credit score in a positive direction.


The steps you can take to improve your credit rating are something anyone can do. One of the most important things is to remember to make all payments for bills and loans on time. Even something as simple as the heating bill can make a difference. Don't let late fees and penalties stack up. By carefully budgeting your money each month, you can ensure that your essential bills will be taken care of.


Keeping lines of older credit open can make a big difference in your credit score. However, you want to ensure you're not using them—or if you are, you ought to pay off the balance each month. You don't want to accumulate any additional debt, but having an established line of credit is a great way to add to your credit history.


Paying down your debts goes a long way in boosting your credit score. Whether it's on a credit card or a school loan, debts are like baggage weighing on your credit score. Paying them on time is a great way to increase your credit score.


While having an established line of credit is good, you don't want to go around town opening lots of new accounts. Why is this? Because opening things like new credit cards or taking out a mortgage requires a hard inquiry which can affect your score for months or even several years. If you're unfamiliar with hard inquiries, they happen every time you apply for credit and the lender checks your file. A hard inquiry can lower your score by 5-10 points each time this happens. This might not be a big deal if you have a high or average credit rating, but every point counts if you're trying to build up your credit rating. Try to avoid hard inquiries when you are attempting to improve your score.


Lastly, consolidate! If you have multiple debts from several sources, consolidating them into one monthly payment is wise and highly recommended. When you consolidate, you can go from having to budget for several payments a month down to one, making it easier to keep track of and pay off.

A calculator is shown next to a red toy car on a pile of money.

How Long Will It Take to See Changes?


Depending on your situation, the time it takes to see changes in your credit score can vary from person to person. If you have a black mark on your record from something like bankruptcy, that can stick with you for up to six years. But if you're simply just starting out and building up your credit, your score may rise quicker.


If your credit is suffering because of multiple credit card debts and late bills, it's important to pay them consistently on time for several months before seeing a marked improvement in your score.


Doing a credit check on yourself is a great way to chart your progress from month to month. When doing so, remember to only check it through soft inquiries, as opposed to hard inquiries, to avoid losing points. Staying on top of your credit score can help you know what to expect when you finally decide to try for a car loan, but it can also help you spot any potential errors that might show up and have them corrected.


When it comes to improving your credit score, the most important thing is to stick with it and remind yourself why you wanted to improve your score in the place.


You and Your Credit Score


A poor credit score isn't something you have to carry around for life. It can change from month to month, depending on your spending and saving habits. If you're trying to bounce back from past credit issues or you're trying to build up your credit, this is great news. Improving your credit score is a necessary step on the road to financial independence.


Whether you want to improve your credit score for personal reasons or you want to increase your chances of getting an auto loan with a lower rate, it's possible. Small steps really add up and can lead to great things.