1 July 2016
Why Your Credit Score Matters When Buying Used Cars for Sale in Melbourne
Melbourne arguably has one of the most vibrant auto markets not only for brand new cars, but also for second hand cars. Owners of these cars may be putting them up for sale as part of a car upgrade process or maybe they want cash to finance other private investments. Whatever the case, buying used cars for sale in Melbourne can provide you with an opportunity to own the car of your dreams at a lesser than market cost. Also, combining this with the availability of credit can mean that you can drive away the very same day you make the financing application.
Even as you contemplate buying a car in the secondhand market in Melbourne, you need to assess your credit score and history because it plays a vital role in the purchase process.
Understanding Your Credit Score
Your credit score is a numerical assessment that quantifies the degree of risk that you present to the financier. Lenders use this score to determine whether they should accept your application for financing and in case they do, at what rate they should advance such loans. Your credit score is basically calculated using information from your credit reports. When processed using an algorithm, this information generates a number representing the level of risk you are.
The higher this number is, the lesser the risk you represent and therefore the likelihood that you will get approved at a much lower interest rate.
The Factors Determining the Makeup of Your Credit Score
Your credit score is basically calculated taking into consideration a number of factors which include:
• Payment History– This factor reflects the number of times you have honored your credit payments in time. The more you make on time payments, the higher your credit score will be. Other types of bills such as utilities and rent do not contribute to your payment profile, but when taken to a collection’s agency, they matter in your subsequent loan applications.
• Amounts Owed – The amount of debt you have compared to your ability to pay determines how much of a risk you are as a borrower and whether you will get approved. The more the outstanding debt, the lesser your credit score is likely to be.
• Length of Credit History– This is an important metric in credit scoring that indicates the length of time you have been using credit. The scoring agency looks at your oldest accounts and the age of your newest accounts. The rule of thumb here is that if you have a longer credit history, your credit score will be higher.
• New Credit– This measures your credit seeking activity. When you apply for and open lots of new accounts within short periods of time, you are painting a picture of a risky borrower and this can dent your credit score.
Before going ahead to submit your application for financing of used cars for sale in Melbourne, you need to get your credit score and analyse it to see what it means for you. If it doesn’t make much sense to you, then it may not also make sense to the lender. Some financiers take
advantage of your ignorance as a borrower to give you a raw deal. This article can be an eye opener and put you on the safe side.