How a car loan can help rebuild your credit
In today’s world, many vehicle purchasers do not fit the criteria of conventional lenders. And today’s world is one with rising expenses, making it harder and harder to have a perfect credit history.
The dreaded imperfect credit score
It doesn’t take much to damage that perfect credit score. And once that credit history is no longer perfect, how does a person work to improve their credit? Or, if you have never had any credit to begin with, how can you build something or get something you can’t have but need to have in order to get it? Confusing right?! This can leave a person figuratively in between a rock and a hard place… feeling like there are little odds of ever getting out of that so-called credit building no man’s land.
How to escape credit building no man’s land: auto loans
So, how can one escape this no man’s land you ask?
Well, vehicle loans can be a great way to get you on the road to credit building, or credit recovery. While it isn’t the loan itself that helps your credit score, it is the relationship you build with the lender that helps to build your score. A vehicle loan initially lowers your credit score because you are taking on more debt, but as you make payments regularly, that’s when your credit score will start to rebuild.
How it works
Auto loans help build your credit because as you continue to make your payments on time to your vehicle lender, you will maintain a good relationship with them. By maintaining this positive relationship with the lender, this shows other lenders that you are a good credit risk and that you are paying your payments consistently and on time. How exactly does this show other lenders? Well, after each of your auto loan payments, your lender reports the payment to the credit bureau. This shows as positive activity on your credit report which ultimately raises your credit score. Over time, this can help push your score into a positive range.
How you can rebuild your credit through your vehicle loan
All you have to do is pay the debt on time and as agreed. This is very important as failing to pay your vehicle financing on time will hurt your credit as it signals the opposite effect: it shows other lenders that you are a credit risk and that you are not paying your loans on time as as agreed. Missing or late payments can only damage your credit score further, so it is important that you pay all of your payments in full, and on time.
You can do this!
It’s important not to be hard on yourself of the any credit issues in the past, but look at it as an opportunity to move forward on a positive note, from this point forward. There is hope and with discipline and diligence, you can get your credit score into the positive range. And with Creditmaxx, you can rebuild your credit will driving ride of your dreams! What’s not to love!