When shopping for a new car, understanding credit can go a long way in improving your overall experience. And while the topic of credit can seem overwhelming and complicated, it's much simpler than many people think. So, what exactly is credit, and how does your credit score affect the car-buying process? Here is a quick introduction to credit along with some of the best ways to build better credit to make your car shopping experience even easier. 

 

What is credit and your credit score?

Simply put, credit is any source of borrowed money that must be paid back, usually with interest. Credit cards, home loans, and car loans are all common forms of credit. Your credit score, on the other hand, is a number used by creditors (people who lend money) to assess the amount of risk they take on when issuing a loan. A credit score is comprised of several things, including the amount of debt you have, how many lines of credit you have open, and how timely you are in making payments on the credit you have. 

How to establish better credit :

Since a credit score is basically a number that determines how much confidence creditors have in individuals to promptly pay back a loan, the best way to establish better credit, is to do things that demonstrate financial responsibility. Some of the best ways to do this are to pay off existing outstanding debt, opening new lines of credit, and staying on top of new payments.

If you have little credit or poor credit, you can still build your credit score by applying for a secured credit card or loan, getting a co-signer on new loans or credit cards, or by applying for a credit-builder loan.

The best habits for better credit :

One of the best ways to build better credit is to make a habit of always making all of your credit payments on time. Additional habits for building credit include using your credit card often but never exceeding around 30 percent of your limit, keeping accounts open for a long time, and routinely checking your credit score once a year. 

Contact us at Sharon Chevrolet for more information on credit scores, and if you have any other questions about financing your next Chevy.