Rebuilding Your Credit with a Car Loan
How Can A Car Loan Help Rebuild My Credit?
Life events happen to all of us. Late payments, job loss, and high debt ratios can all affect your credit and ability to qualify for new loans or a mortgage. If you need to rebuild your credit and potentially even want to work towards qualifying for a larger purchase like a home, a car loan can help.
Excellent steps for rebuilding credit include:
Keep making payments on time
If you still have active credit cards or loans, continue paying them on time. The same thing goes for accounts that aren’t reported to the credit bureaus.
Keep balances low
High outstanding debt can affect a credit score, keeping them low can improve your score.
Pay off debt
The most effective way to improve your credit is paying down credit card debt rather than moving it around from one card to the next.
Use a mix of credit
By having a mix of different credit products, such as a credit card, car loan and line of credit (just remember to keep the amount being borrowed to 35% or less).
A Car Loan is one of the strongest forms of credit that can help your credit rating
Once your larger debts are paid down and you can afford the costs of owning a vehicle, consider a car loan.
Establishing a new source of credit is important when you have suffered from bad credit. Ironically, the only way you can start building your credit, is by obtaining new forms of credit. An automotive loan is one of the strongest forms of credit that can help you greatly improve your credit rating. One of the preferred methods of demonstrating good credit habits is with an approved auto loan from a reputable lender or financial institution. However, beware of lenders that make bold promises to increase your credit score or build your credit.
Got a question? Give Jen Farough our Credit Specialist a call at 519-991-8006