If you’re struggling with a poor credit score, you know that getting approved for a vehicle can be difficult. Bad credit is not uncommon, in fact, 2.85% of Canadians have an extreme risk rating of 520 and under, while 15% of Canadians struggle with a poor credit rating of 520-680. That means that over 6.4 million Canadians have less than good credit.
The fact of the matter is, your credit history plays a major part in getting a car loan. While it’s not something you can solve overnight, it’s critical to determine the root causes and create a plan of action – if you don’t, it can decrease any chances of you getting a loan. Here, we’ll discuss five steps to rebuilding your credit and buying the perfect vehicle for your family.
Only a sliver of people have an absolutely terrible credit score. That’s why it’s important to know your credit rating prior to walking into a dealership and purchasing a vehicle. Finding out that your credit score is above 650 will allow you to apply for a standard car loan, while 680 and higher will allow you to apply for financing at a lower interest rate.
In Canada, you can get a free credit report by ordering from two credit bureaus: Equifax and TransUnion. As both companies keep separate information on file, it’s a good idea to check both sources. This will allow you to report any errors that don’t match up.
Once you’ve received your report, it’s important to find out how you can repair or improve it. Planning ahead and creating a monthly budget is a great way to pay off debts and allocate the rest towards savings. If your expenses outweigh your monthly income its time to take a step back and fix the problem immediately.
Once you’ve begun budgeting accordingly, decreasing your credit card debt and late payments should be a number one priority. A maxed-out credit card is a significant factor contributing to poor credit for many Canadians. Paying off 50% of your limit is not only advised but will save you more money in the long run, as less interest is accumulated. Paying off old bills, even if slowly, is another necessary step to repairing your credit score. If you’re feeling overwhelmed, reaching out to a credit counsellor to consolidate your debt into an affordable monthly loan in an excellent choice.
By taking the right steps and improving your habits, you will be able to rebuild your credit and stay debt-free. Additionally, allocating a portion of your income towards savings will allow for a quicker down payment on your future vehicle, as well as improve your chances of being approved for a loan.
The internet is your best resource for finding a car that fits both your budget and lifestyle. Once you know your monthly expenses, it’s easy to estimate what you can and can not afford. While you may be tempted to overspend, your vehicle should not cost more than 35% of your yearly income. Avoiding all the extra frills and tech features is another way to save money on your monthly bill. Remember to always budget accordingly for gas, vehicle insurance and dealership fees.
Now that you know your budget and the type of vehicle you’re looking for, consider getting pre-approved for an auto loan. When comparing loan providers, it’s vital to find out the interest rate that you’re dealing with. By comparing the different options, you will be able to pick a loan that is most manageable for you. Paying it off slowly and on time will not only give you access to a vehicle but will slowly rebuild your credit.
At Cheap Cars Canada, our bad credit program covers Canadians in the following situations:
- Bad Credit
- No Credit
- Missed Payments
- Late Payments
Our 60-second application process is designed to connect you with a dealer in your area who will provide you with both a vehicle and an affordable loan. We are partnered with hundreds of dealerships across Canada, so we can guarantee a dealership within your neighbourhood. In fact, if you can’t find us in your area, we’ll deliver the vehicle to you!
Finding an affordable vehicle has never been easier, apply with us for free and get started on rebuilding your credit today.