Everyone’s familiar with the credit score portion of his or her credit report. Most people think their credit boils down to one numeric assessment of 330 to 830, but that’s not the case. When auto lenders look at your credit report, they are seeing more than you might think. So whether you have good credit, bad credit, or no credit at all, it’s important to understand exactly what information lenders have to work with.
No matter what your credit score might be, there are certain sore spots that could be appearing on your credit report, scaring potential lenders away. In the scope of the Canadian used car industry, these blemishes are especially important to catch, as the bulk of Canadian used car purchases are made possible only through lending.
#1 – Charge Offs
Opening a credit account of any kind is a great way to build your credit, but can also destroy it. While making your payments on time can tell future lenders that you’re reliable and have proven responsible, allowing a few payments to get away from you could result in what’s known as a “Charge Off”.
After about 6 missed payments, your credit card company might release an acknowledgement that they don’t anticipate they’ll ever receive the missing payments from you. This is a charge-off, and it doesn’t mean that you’re relieved of the debt. Credit card companies levy their charge off capabilities as a way to further pressure you into making your payments. Charge offs not only drastically lower your credit score, but appear explicitly on your credit report for every to see.
When a potential lender sees a charge-off on your report, it tells them a couple things. It says that they can expect you to miss a lot of payments and that you have outstanding debts to pay before you could pay them back. This can really hurt your chances of gaining approval, as it shatters any confidence lenders might’ve had in your ability to pay.
Check your credit report for any charge offs and reach out to your creditors to set up a delinquent payment plan of some kind. This can help you resolve the debt quickly and manageably, while also getting the charge off removed from your report.
#2 – Tax Liens
Your taxes might not be the first thing you think of when it comes to your credit. People tend to think of taxation as an entirely different entity from their finances, but that’s not the case. Failing to pay your due tax on any piece of taxable property can result in what’s known as a “Tax Lien”, and yes, they’re reported to the credit bureau.
Like a charge off, a tax lien serves to pressure you into paying the debt or watch your credit suffer. What’s more, a tax lien means that the government is attempting to claim your property, and could eventually result in foreclosure.
So when lenders see a tax lien on your report, it tells them that you can’t be trusted to maintain the fiscal solvency of your property. As a result this makes them very disinclined to finance a new piece of property for you.
Tax liens are frightening for a variety of reasons, not the least of which is the damage they do to your credit. If you see a tax lien on your credit report, just reach out to the IRS and try to get a payment schedule organized before your property becomes truly threatened.
#3 – Repossession
Perhaps the worst thing a lender could see on your credit report is the indication of past vehicular repossession. Repossession is when you’ve failed to make adequate and timely payments to your previous auto lenders. As a result, they are entitled to seize your vehicle and assume ownership themselves.
This is obviously a terrible blemish for potential auto lenders to see on your report. It essentially validates their worst assumptions about your ability to pay. If a lender sees that you have a history of repossession, they’ll most likely refuse to approve your loan as you have a track record of flaking to the worst extent possible.
Unfortunately, if a repossession winds up appearing on your credit report, there’s not much you can do other than wait. After seven years, the repo will automatically be removed from your report and lenders will once again consider you for approval.
If you’re concerned about any of these sore spots appearing on your credit report, Ridetime is the used car dealer for you. Ridetime works with a roster of lenders that understand and work with applicants to get past their problematic credit reports. Don’t let your past keep you from moving forward, buy your next used car from Ridetime and boost your chances for approval.