Getting your first car loan can be tough without a credit history, but building credit doesn’t have to be complicated. Here’s how you can prepare:
Check your credit reports for errors and fix them.
Pay bills on time to build a solid payment history.
Keep credit utilisation low - use less than 30% of your credit limit.
Avoid new credit applications for at least six months before applying for a car loan.
Once your credit is ready, calculate your car budget, including loan payments, insurance, and maintenance. Tools like loan calculators can help you estimate monthly payments. Remember, paying your car loan on time helps improve your credit for future loans.
For first-time borrowers, platforms like Ausloans connect you with lenders without affecting your credit score. Start building your credit today to secure better loan terms tomorrow.
Your credit score is a number that sums up your credit history and helps lenders decide your approval chances, interest rates, and loan terms. Let’s break down the main factors that influence your score.
Getting your credit in shape before applying for a car loan can help you secure better interest rates and loan terms. Here’s how you can strengthen your credit profile:
Visit AnnualCreditReport.com to get free credit reports from Equifax, Experian, and TransUnion. Carefully check for mistakes like incorrect payments, unfamiliar accounts, or outdated negative items. If you find errors, dispute them online or by mail. Credit bureaus are required to respond within 30 days. Keep copies of everything you submit.
Payment history plays a big role in your credit score. Always pay at least the minimum amount due on time. It’s a good idea to set up automatic payments a few days before the due date. If you don’t have a credit card yet, consider getting a secured credit card. Use it for small purchases and pay off the full balance each month.
Aim to keep your credit utilisation rate below 30%. You can do this by paying down existing balances, making multiple payments during the billing cycle, and avoiding carrying high balances on your cards.
Every new credit application results in a hard inquiry, which can temporarily lower your score. Avoid applying for new credit at least six months before seeking a car loan. If you must apply, space out applications by three to six months. While inquiries stay on your report for up to two years, their impact lessens over time.
Once your credit is in good shape, the next step is setting a realistic car budget and calculating your loan payments.
Once your credit is in good shape, it's time to figure out what you can afford.
Start by calculating your net monthly income. Then, set aside money for:
Loan payments
Insurance costs
Maintenance and repairs
To find out how much you can borrow, subtract your current debt payments from your net income. Tools like the Ausloans car loan calculator can help you tweak the loan amount, interest rate, and term to see how monthly payments fit into your budget [1]. Use this approach to compare and assess loan offers effectively.
[1] Ausloans car loan calculator
Once your car loan is active, you can use it to help improve your credit score by managing it wisely.
Making your loan payments on time is one of the best ways to build a solid credit history. Consider setting up automatic payments to ensure you never miss a due date. Late payments can negatively impact your score, so schedule payments early to account for any processing delays.
A shorter loan term lets you pay off the debt faster, which can help improve your credit sooner. On the other hand, a longer term reduces your monthly payments, making them more manageable. Pick a term that works best with your budget and financial situation.
Making consistent, on-time payments adds instalment credit to your credit report and helps extend your credit history. This can make you more likely to qualify for better rates and terms on future loans.
Managing your budget and making payments on time are crucial, but having expert help can make the loan approval process much smoother.
Ausloans, a top auto finance broker in Australia, simplifies the process with its AI-powered platform, Zink. This tool connects new borrowers with offers from over 40 lenders, providing rate estimates and approval odds - all without affecting your credit score. Backed by more than 150 asset finance brokers, Ausloans, a member of both FBAA and AFCA, offers personalised support to guide you through every step of your car loan journey. Their assistance can help you secure a loan that aligns with your financial goals.
With a 5.0★ rating from over 1,320 Google reviews, clients praise Ausloans for their transparent and hands-on approach [1].
[1] Google Reviews, Ausloans.
Follow these steps to boost your credit and secure better car loan terms:
Check your credit reports for any mistakes.
Pay all your bills on time.
Keep your credit utilisation below 30%.
Hold off on applying for new credit.
Plan for loan payments, insurance, maintenance, and fuel costs.
Set a practical limit for your monthly payment.
Save up for a down payment to reduce your loan amount.
When you're ready, Ausloans' AI-powered platform can connect you with competitive offers from over 40 lenders without impacting your credit score. Plus, our expert brokers guide you every step of the way.