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Can I improve my credit with a car loan?

credit score
Written by floreenathomas

A car loan positively impacts your credit. Making your payments on time will improve your credit score by helping you build a good credit history.

If you have bad credit or no credit, we can help you purchase a vehicle through a car dealership that works with consumers who have credit problems or special situations with their credit.

Factors that influence your credit history

According to the FICO scale, consumers’ credit scores range from 300 to 850 points, which car dealers generally use to make financing decisions.

If you have never applied for a loan, your credit score should be in the lower middle of the FICO scale, while if you have bad credit, everything will depend on how you have managed your credit.

Suppose you take into account the following information. In that case, we assure you that your headaches will end because your relationship with the credit system will be more pleasant, and low-interest purchases will be at your disposal.

  1. Payment history. This determines 35 percent of your credit score. When you pay on time, your points go up, while they decrease if you have late payments. Obtaining a car through financing will help you build a good credit history.
  2. Amount due. The money you owe affects 30 percent of your credit history. This means that to maintain a good credit history, it is advisable only to use 30 percent of what you are approved for. Try then not to use more than 30 percent of the balance of your credit cards. And if that happens, try to lower the ratio as soon as your budget allows. You must know that when you are approved for financing a vehicle, your score drops a little, although, with each payment you make on time, your average will begin to rise.
  3. Age of your credit. Fifteen percent of your points, according to FICO, are based on the length of time you’ve been using credit. The longer your story, the better your score. This is where car financing comes into play. Since auto loans typically last five to seven years, you’ll have plenty of time to improve your credit history. Remember to achieve this. It would help if you kept up with your payment installments.
  4. Credit type mixes. Ten percent of your points are based on the types of credit you handle. A good combination that helps raise your credit points is installment loans such as mortgages, car loans, and credit cards.
  5. The new line of credit. Ten percent of your credit score is affected when you get new credit. If you open multiple credit cards simultaneously, your points will go down, although if you meet your monthly payments, your credit score will go up.

Some points to consider

  • Remember that starting several credit accounts in a short period negatively impacts your credit score.
  • If you are going to inquire about a credit application, such as purchasing a vehicle, make all inquiries within 14 to 30 days so that they are considered a single inquiry. Thus, you will not negatively impact your credit.
  • Outstanding balances are part of your credit report. Pay your outstanding debts, and your credit will rise.

The solution is at your fingertips.

Remember that the better you manage your debts, your credit will improve. In this way, in the future, you will be able to open new lines of credit with much lower interest, and it will be easier to make larger purchases such as a house or the car of the year.

However, buying a car won’t be a meteoric rise to the top, but it will help you improve your credit score because it’s a big financial commitment, second only to buying a home.

If at this time lousy credit stands in your way to acquire the car you need, at Auto Credit Express, we can help you.

We have an extensive automotive network that has auto agencies specializing in subprime auto loans. All you have to do is fill out our free application form. It’s that easy and no strings attached. What are you waiting for to take the first step?