Purchasing and Negotiation Training

Steve Hague, author, speaker, and Certified Purchasing Manager

Editor’s note: Steve Hague is a frequent contributor to this blog.

How important is credit when financing a vehicle purchase?  It’s everything!  When shopping for a car, if you’re planning to finance it’s also important to shop for the best rate.  

Before you start shopping though, you need to know what shape your credit is in.  The first thing you should do now and at least every couple of years, is obtain your credit report for free.

You are entitled to obtain an annual free report under Federal Law. To obtain your report, visit this site   It allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.  You can also call one of them at: Equifax: 800 525-6285, Experian: 888 397-3742, or TransUnion: 800 680-7289 

The sites are secure meaning that there is very little chance that your personal information will be compromised.  You will have to share you social security number in order for the report to be generated.  There is also a FAQ (frequently asked questions) tab on the site that will answer most questions you may have.  For $14.95 additional, you can sign up with one of the 3 sites individually and receive your credit score. 

Read the Report Carefully for Errors

Some of the information that appears on the report may be outdated or inaccurate.  If you see an obvious error, contact one of the three reporting companies at their web addresses:

Equifax           Experian          TransUnion

You will be able to electronically dispute any negative findings on your report and/or you can speak with a representative from one of the companies.  Use the toll free numbers above to do this. 

You may also need to contact the bank, store, or other institution listed on the report if there is an error.  Sometimes simple oversights such as a small fee remaining on a long cancelled credit card can appear.  While this may have little to no impact, you should try to have it removed to prevent future problems. 

To get the best deal in financing the purchase of a car, truck, or SUV; you must know your credit score. It is the measuring stick that the dealership, bank or credit union will use to determine the interest rate available to you to finance your purchase. 

Your credit score, also called a “FICO” score after the company that developed the formula is based upon payment history, amounts owed, length of credit history, new credit, and types of credit used.  Scores range from 350, indicating extremely high risk, to 850 indicating extremely low risk.  Paying all of your bills and debts on time is the best way to maintain a good score.

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The greater your indebtedness, (mortgage, car loan, other indebtedness), the greater your credit risk.  If you pay on time, or better yet, early, your credit rating improves because you have good history. 

Do’s that affect your credit score:

• Do pay off credit card and other bills on time and in full if possible
• Do check your credit history annually.
• Do not apply for multiple credit cards like department or furniture store cards, especially if you never use them or only use them once
• Do make sure that all credit previously extended to you appears on your report

 Do Not’s that affect your credit score:

• Do not take on more debt than you can afford
• Do not ignore overdue bills or those in your name that aren’t yours
• Do not apply for credit if you have just graduated from college
• Do not apply for a car loan for three years following a personal bankruptcy 

Here’s an example of how a simple oversight can cost you money: John is a 30 year old man who had always paid his credit card debt in full and previously had a car loan that he also paid in full every month.  When John applied for a mortgage, he was surprised to learn that he didn’t get the best interest rate available.  When he took a look at his credit report, he noticed that there was an uncollectible debt listing on his report which is the worst mark one can have on their report. 

Upon investigation, he learned that a few years earlier he had applied for a high credit account with a major credit card service.  Since he hadn’t heard back from them, he assumed that his application had been denied.  In fact, the company granted him the card and began to charge a monthly fee but sent the bill to the wrong address. Since the bills never got to him and he didn’t check his credit history, they wrote it off as unrecoverable debt.  John was able to rectify this and get the best rate possible. 

This clearly shows the importance of trying to keep your debt load low while also building history.  Make sure that you keep an eye on your credit as it will make a big difference in financing your next vehicle purchase.