How A Missed Payment On Your Auto Loan Will Affect your Credit Score

Did you ever wonder how a missed payment on your auto loan will affect your credit score? It's more important then you might think. As soon as you are 30 days late on your payment the lender will report your account to the credit bureau. The three major credit bureaus, Experian, Equifax and TransUnion use this information to create a personal history report on you. Your FICO score is based upon data found in your credit history. Your credit score will affect the interest rate that you will receive on a car.

The lower you score the more interest you will pay. If your score is really bad, or low, it can be difficult even buying another car. Scores range from a low of 300 to 850 being the highest. The higher your score the better your credit is. If you have a high credit score you can get better deals when borrowing money on a car or anything else. You can get the lower interest rates because of your excellent credit.

If your score is low you will have to pay more in interest for your loans because you are a higher risk to the lenders. If you have a lot of late payments on your history report you may be referred to as a subprime borrower, which means you have low credit scores and black marks on your report. You may be forced to deal only with lenders who cater to people with bad credit. The down side of this is that these loans have really high interest rates.

Your FICO score is broken down into five categories and key areas: the most important area is how you pay your bills; 35 percent of your score is reflected by your payment history. (Paying your bills on time is the best way to improve a low credit score.) The level of debt you have is 30 percent. The length of your credit history reflects 15 percent. The amount of new credit that you have applied for is 10 percent and the remaining 10 percent is based on the type and mix of credit you have. All five areas are used to calculate your credit score. Remember that over one-third of your score is based on how you pay your bills. Can you see why it is so important now to make your payments on time?

The best way to raise you credit score is to make all your payments on time, seeing how 35% of your score is based on how you pay. One single 30-day late payment on your report can drop your score by as much as 110 points. The later your payments are, and the more you have, the more it damages your credit score. Paying your balances off and keeping your debt low can also help raise your scores.