How car loans help with improving your credit
When you get your car (new or used), you are adding to your credit. It adds to your credit history which has a positive impact, assuming that you will pay on time each time. If that is then followed properly over time, your overall credit history will begin to improve, offsetting negatives before as you will gain from building a history of on-time payments.
When you first look at your credit reports you may feel overwhelmed with the data, but don’t fret:
Auto loans on your credit report
Your auto loan will likely affect your credit report and your credit score. When you first look at your credit reports, you may feel overwhelmed by the data. To see your car financing, turn to the page on reports provided by each of the three major credit bureaus— Experian, Equifax and TransUnion — that lists your car loan account and look at these two categories:
Type of accounts: An auto loan is typically reported as an installment account. Other types of installment accounts include mortgage loans and student loans. Those are payments of the same amount, made for a set number of payments. Because a portion of your credit score is derived from “credit mix”, getting a car loan may help your credit profile if you don’t already have an installment loan.
Current status: If you’re always on time with your car payments, your credit report will note that your car loan is “current” or “paid as agreed.” Because payment history has the biggest influence on scores, staying current on your payments could benefit your credit score significantly. Should you fall 30 or more days behind, you risk having your car repossessed by your lender and ruining your credit. If you make all of your auto loan payments on time and your credit reports show that over time, great. But if an error pops up — for instance, an on-time payment is posted as late — consider filing a dispute. Remember, you can get free copies of your credit reports every 12 months to make sure all your accounts are being reported correctly
If you’re thinking about credit repair, chances are you’re going to have a hard time securing approval for a car loan. Have you considered giving us here at autoloans.ca a call? We afford every application we receive the same decision process, meaning that no matter how bad your credit score is, you’ll get the same degree of attention and care as everybody else.