If your credit score is not good and you still want a loan to buy a car, you might have to pay extra. Here are some tips about the pitfalls, which can make your credit score even worse, and how to avoid them.

How Your Credit Score Affects Your Eligibility

A FICO (Fair Isaac Corporation) credit score of above 720 is considered good, a score between 640-720 is still considered ok, but if you have a score of less that 640 then it is very unlikely that you will get a credit for a car loan. If you are facing a situation like that and are not able to clean up your credit then you may consider a subprime car loan, this will not only re-establish your car credit, but will also raise your credit score. If you decide to take out a subprime car loan then take into account the extra charges you will have to pay.

How To Improve Your Credit Score And Avoid The Common Pitfalls

If you have a bad credit score the best way to improve it is to take a new loan and pay it off according to agreement, but make sure that your plan does not backfire, because if you are not able to pay according to the agreed terms, then you will end up with a credit score even worse than before.

So before you take out a new loan, you should look for the hidden costs and the ways to avoid them, following points must be taken into account.

Insurance

Ask your insurance broker as well research yourself to find out from the vehicles you choose, which one carries the lowest premium, off course not ignoring the other factors like price, fuel consumption, anticipated repair costs etc.

Fuel Prices

With the rising fuel prices it is very important to adjust your project expenses accordingly, it will also depend upon on how much you actually travel during a month. As a safe rule add 50% to your fuel expenses for the future.

Repairs

Make sure that you have enough monthly income and/or savings for the vehicle repairs that may come up from time to time. If that is not the case then you must think of paying extra for an extended after sale service contract with your vehicle if possible.

Your Monthly Income

As a safe rule all your planned expenses including the auto loan payment should be 50% of your income and your auto loan payment should be 15% of your income. If you take care of these points then you will not have any problem in repaying your loan and getting rid of bad credit and improving your credit score.

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