How Getting A Car Loan Can Help You Rebuild Your Credit

How Getting A Car Loan Can Help You Rebuild Your Credit

Do you have bad credit? Do you need a new car? If your answer to those questions was a YES, you are probably wondering how I can get a car loan with my bad credit; and if there’s some way to actually do that, how will it help me improve my credit score? Well just read on and you’ll get the answers to your questions.

What is Credit?

Credit is defined as the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. The key word here is trust. From a business standpoint, your credit score is like your trust meter. If your credit score is low, companies will be less likely to trust your ability to repay a loan. On the other hand, with a higher credit score, there is a good chance more companies will be willing to offer you a loan because they trust your ability to repay that loan.

Factors That Affect Your Credit Score

Payment history is a major factor because it lets companies know if you pay your bills on time and if you are making payments in full. Other factors that affect your credit score are the number of open credit cards you have, how many are maxed out, how many have you recently applied for or received, and have you also applied for any loans recently.

Why A Car Loan?

Car loans are not like credit cards. With credit cards, you can continue to make purchases against your cards and make payments based on the amounts of those purchases; but there is no collateral for the credit card to take back if you fail to make the payments. A car loan payments, on the other hand, are fixed at a specified amount and paid over a predetermined number of months, and the vehicle is the collateral for the loan. That means if you fail to make your car payments, the loan company can repossess the vehicle and sell it to recoup some of its losses. By making your car loan payments for the prescribed amount on time every month, you are showing the loan company that they can continue to trust you to make those payments until the loan is fully paid off, during which your credit score will continue to increase.

If you can, it’s always beneficial to make a down payment,  no matter how small it may be. Doing so will improve your chances of getting approved and will lower your monthly payments. Always choose a vehicle that is within your budget, or even less than afford each month to prevent going over if unexpected expenses pop up. That also gives you the ability to make higher payments than required, which will improve your score and will tell the loan company that you are responsible.

What Exactly Do I Need to Do Before and After Getting a Car Loan

Fairless Motors has been one of the area’s best family owned dealership for pre-owned cars for almost 30 years. Our finance department has over 50 years of combined expertise to help customers with any credit history get approved. Fill out our short credit application and you’ll be on your way to an instant approval. Our experienced team will get you behind the wheel of the vehicle that best fits your needs and your budget. We maintain an inventory that includes cars, crossovers, SUVs, minivans, and pickups that span the auto industry.

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