What Bad Credit Financing Does to Your Credit Score?
Sure, you have seen the signs reading “approved bad credit financing in Spartanburg, SC”. And sure, you have considered getting into the deal as you need a car to live your life and banks will not entertain your credit request due to your subprime score. But you are unsure of what bad credit financing can do to your current credit score. Does it tell the authorities that you are desperate which can further plummet your score? Fortunately, things do not work like that in the real world. The way bad credit financing affects your FICO score is precisely similar to any other debt of any other financial institution.
Bad credit financing and credit scores
To understand the exact influence of approved bad credit financing in Spartanburg, SC on your FICO score, you must first delve into how the score is calculated in the first place. FICO takes five major components into account while calculating credit scores.
1.Amount currently due
4.New credit recently added
5.Length of credit taken
Now, say you visited a buy here pay here dealership with used automobiles for sale in Spartanburg and financed a vehicle there with bad credit. This means that you have just added a loan in your existing credit portfolio. Naturally, your net amount due will rise, the new credit added parameter will also see an increment. With the length of the credit taken being long, your credit score will see a dip. If you already have a decent number of existing credits like student loans and mortgage, credit diversity will become better and your payment history might pull the score up with time. But the initial dip is imminent. This happens to all borrowers.
Ways to protect your credit score
You can always check the dip and arrange for ways for your credit score to improve sharply.
1.One, shop for the best cheap used cars in Spartanburg which will limit your amount of credit due.
2.Pay your monthly dues on time without any hiccups.
3.Go for credit lengths of 3-years or less to both save on interest payments and improve your score.
4.Shop from dealers that report your monthly payments to the respective authorities which will ultimately help your score.
With these, the initial dip will be temporary. You will not only recover from the fall but also see your score rising at a modest rate. Bad credit financing is a life savior for those who cannot afford to wait to get a car. Use it for its benefits and move ahead without worries.
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