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Dollars & Sense

Good Credit

How to Strengthen Your Credit to Buy Your First Truck

By Sean M. Lyden - Staff Writer
Posted Aug 13th 2018 11:03AM

Your credit score not only impacts whether or not you get approved for financing to buy your first truck but also several other factors tied to the cost of vehicle ownership, including the required down payment, interest rate (and, thus, monthly payment), and insurance costs.

In other words, even if you could qualify to buy truck with a below average credit score, it could still cost you hundreds of dollars (or more) per month, making it much more difficult to make money with that truck and build a sustainable business.

But if you’ve experienced financial challenges that have damaged your credit, it doesn’t have to be the end of your dream. That’s because when you’re aware of the impact of your credit on your business costs, you’ll be more likely to develop—and act on—a plan that puts you on a stronger financial footing to raise your credit score...and, ultimately, lower your truck ownership costs.

So, what can you do to improve your credit? Here are four steps.

Step 1: Get a free copy of your credit report.
You’re entitled to one free credit report per year from each of the main credit reporting firms:

Many of your credit card companies also give you free access to your credit score—and, in some cases, your full credit report—without negatively impacting your score.

Step 2: Identify and address derogatory items.
These could include “charged off” accounts, liens, collections, late payments, and bankruptcy.

If you have any of these items on your report (including bankruptcy), it’s not the end of the world. There are ways you can address them to improve your score.


Suppose you had an unexpected family medical emergency that caused a financial hardship where you couldn’t make your credit card payments. And those accounts were charged off and sent to collections. What can you do?

Here’s your action plan:

  • Get yourself onto a stronger cash-flow footing where you can start putting money into savings to use to pay off your debts.
  • Contact the company that now owns the debt. You’ll find the creditor’s contact information on your credit report.
  • Pay the balance owed.

If you can’t pay the full balance, another option is to ask to speak with someone with the creditor who has the authority to negotiate a settlement of the debt at “less than the full balance.”

You don’t need to be a high-powered lawyer to negotiate this type of deal. That’s because the creditor most likely bought your debt for pennies on the dollar. So even collecting 25 or 30 percent of the full amount could be profitable for them, depending on the situation.

The upside to settling your debt for less than the full balance is that it will change the account status on your credit report from “charged off” or “collections” to “settled,” which could help improve your score. The downside is that the difference between the amount you owed and the lower amount you actually paid to settle the account could be considered as income for tax purposes. So, consult with a tax professional to assess the potential tax implications of settling the debt.

Step 3: Pay down your credit card balances.
Credit utilization rate refers to the percentage of your credit card balances relative to your credit limit. The higher that percentage, the lower your credit score. That's because if you've nearly maxed out your credit cards—say, for example, you're at 90-percent—you're viewed as a much higher credit risk to lenders.

So, focus on paying down your balances to lower your credit utilization rate. Even reducing your ratio to under 50-percent could go a big way to help raise your score.

Step 4: Pay on time.
This seems obvious. But even one recent late payment can drop your credit score significantly.

Yet, if you do have late payments in your report, you can still improve your score by consistently making on-time payments moving forward. Your score will improve as the time increases since your last late payment.

The Bottom Line: Be Patient
It will take time for any changes you make to be reflected in your credit score. So, be patient. And commit to the process of stabilizing your finances, including strengthening your credit score, to put you in the best position to succeed for the long haul as a new expedite owner-operator.


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