I think that most people will agree that it is important that one understands the car buying process and how credit rating affects interest rates and the overall car buying experience before one goes to the dealership.

First, the car buyer should know that banks, lenders, insurers and car dealerships regard a credit rating or credit score as a reasonably accurate indicator of future consumption behavior. While insurance companies relate credit scores to the probability of claims being filed, lenders, on the other hand, use the rating as an indicator of potential defaults.

Low credit ratings, therefore, translate to tougher loan terms and higher insurance premiums. That is why it is recommended that car buyers check their credit report for discrepancies in their credit history. They can find out by contacting any one of the three credit bureaus — Equifax, Experian or TransUnion.

Credit ratings are expressed in a numerical range from 350 to 850 which gives an indication of the consumer’s bill paying habits. To a lender the score indicates the level of risk that the lender will undergo by granting a loan to the consumer. High scores mean consumers are likely to be more trustworthy and have a higher tendency to pay their bills on time.

The recent financial trends have not been encouraging for those who have bad credit or little credit. The rise in foreclosures, the steady climb in inflation that outstrip the rise in wages, the astronomical increase in gas prices all combine to make several of us think of our financial situation and our credit rating.

A slight move in your credit score can make a world of a difference when it comes to the interest rate you will pay for loans such as auto and mortgage loans. Here are five things that affect your credit rating negatively.

#1 The biggest factor affecting your FICO score is your payment history: How promptly you pay and how often you've been delinquent on monthly payments. If you are late on your bill payments, event a 30 day late on credit cards or regular bills such as utilities, phone or house payments and your FICO score will begin to decrease dramatically for each late payment. So it is very important that you pay your bills on time. There is no room for procrastination when it comes to your credit.