It’s important to know about your options before finding auto financing for those with poor credit. Bad credit affects your credit score, which will make it difficult for you to get other types of loan. This is why many people wonder what will happen if they’ve cleared off their debt from this type of credit. Here’s a short guide to help you understand bad credit:
What Happens after You Pay Off Your Debt?
Bad credit won’t disappear from your credit report immediately after paying off all your debt. It can stay there for at least seven years, so you might as well avoid another loan if you aren’t sure you can repay on time. If you’ve paid in full, you can ask the lending company to put a “paid in full” note next to your negative report. If you plan to settle your debt within a specific timeframe, you’ll get a “settled in full” note instead. These notes are better than leaving your report unpaid.
What’s The Fastest Way to Improve Your Credit Score?
The average credit score hovers at around 723, but many lending companies prefer those with a score of 760 or higher. If you can’t find a good auto-financing firm for people with bad credit, then improving your score is the ideal option to get out of a bad credit:
- Pay credit card debts that are close to their credit limit immediately. Don’t spend more than 30% of your available credit in a single transaction to be safe.
- Look at your credit report and determine if there are mistakes, as these might be the reason why your credit score is low or decreasing.
- Many people are scared to go through the same situation, so they stop using credit cards. This can still affect your credit score, however. Use one major credit card occasionally to keep your account active.
Bad credit is part of your credit history, so you can’t get rid of it quickly. The only thing you need to do is improve your score, so lending companies will see that you’re getting back on your feet.