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Playing Offense: Being Proactive in Lowering Your Interest Rate

Posted on Oct 14, 2011 by Thalia Green
Oct 14

Lowering the interest rate on your car loan can save you several hundred to a few thousand dollars, so it definitely makes sense to do so if it is an option. If you are currently stuck with a car loan that has a high interest rate, here are some steps you can take to improve you situation and get a lower interest rate.

 

Look over your credit report.
Some people think that identity theft is what happens when someone takes your credit card and uses it illicitly. However, this type of theft is usually very easy to clean up, as the card company will usually reverse the charges for you, and it does not affect your credit score. But what if someone opens a line of credit (like a new card or a loan) without your knowledge? The only way to find out if this has happened is to review your credit report. The three big credit reporting companies, Experian, Equifax, and TransUnion, will permit you to download your credit report once a year for free. While it will not include your FICO score, you will be able to see your entire credit history. Read over the report carefully and make sure there is nothing on it that you don't recognize. You should usually review your report with at least two of the three bureaus, as items are not always reported to all three. If there is anything that you believe is in error, contact the credit reporting bureau to find out what can be done to remove it.

 

Pay your bills on time.
Your credit score is determined by a number of factors, but the biggest one is your history in how often your bills are paid on time. If you've missed a payment or two, this can have a significant impact on your credit score. Without a doubt one of the easiest ways to improve your credit score is to establish a history of on time payments to your creditors. This includes rent or mortgage, utilities, and outstanding credit cards. The longer you pay your bills on time, the more your score will improve.

 

Responsible borrowers have the power to improve their credit score significantly. This can mean that you'll be able to negotiate a lower interest rate on your car loan, which would give you more money to use elsewhere in your budget. 

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