What you should know about credit before you go car shopping

(ARA) - Whether you've decided you've gone through your last winter without four-wheel drive, or you're rewarding yourself for making it through the recession with your financial health intact, summer is a great time to begin shopping for a new car. And experts predict that car dealers, still stinging from some of the worst sales years in motoring history, will welcome summer car buyers with great deals.

But will you be in a position to take advantage of the possibilities? What good does zero percent financing, payment-free grace periods or value-added incentives do for you if you don't have the good credit you need to secure financing? It may be an auto-buyer's market, but lenders are in the driver's seat, and many are still putting the brakes on financing for those with less-than-great credit scores.

To get the car you want at an interest rate you can afford, it pays to be proactive. Before you set foot on a dealer's lot or peruse the auto section of the newspaper, take these steps to ensure you're in a position of power when it comes time to negotiate your auto loan.

Step One - Secure your credit

Your credit score and an accurate credit report are your most powerful tools to help you negotiate for the best possible deal on a car loan. If you apply for financing before you know what your score is, or what information is contained in your credit report, you'll be the only one in the transaction who's ignorant of your credit worthiness. Potential lenders will definitely look at your credit report and consider your score when deciding whether to give you a loan.

If you haven't done so recently, obtain a copy of your credit report and score. Web sites like freecreditscore.com make it easy to begin evaluating your credit. You'll be able to see how your spending behaviors can impact your credit score and report, and track both over time.

With your credit report in hand, look at the factors that a lender will be interested in, such as your payment history, the total amount you owe to all your creditors, the length of your credit history, recent new credit applications and the types of credit you use. If there are errors or negative items on your report, work to clear them up before you approach a lender for an auto loan.

Step Two - Secure your financing

Experts agree that the best loan deals are rarely found at dealerships. Just as being pre-approved for a mortgage makes you a stronger negotiator, getting approved for vehicle loan before you go shopping puts you in a position of power. Banks and online lenders can often offer you a better interest rate than you might find at a dealership. Plus, getting pre-approved for your auto loan will help you know how much you can afford to spend on a car, and make you more liable to stay on budget when you're negotiating a final sales price.

Many buyers, however, find it easy and convenient to go through a dealer for financing. Even if you decide to go that route, it pays to explore other financing options before you talk to the dealer. In order to offer you financing, a dealer may have to go to multiple lenders - which could mean multiple inquiries on your credit report; too many inquiries in a short period of time can actually lower your credit score.

Once you're confident of your credit worthiness, and you've been pre-approved for an auto loan, you'll be better positioned to take advantage of the many deals available to summer auto buyers.

Courtesy of ARAcontent