Rebuilding Your Credit with an Auto Loan
Rebuilding your credit can seem like an intimidating task at first but with some careful planning and consistency, your credit can restore itself over time. A great way to kickstart this process is by investing in a vehicle with an auto loan. Here are a few of the ways an auto loan can establish good habits and improve your credit when you create the right financing plan for your lifestyle. Our finance team at Auto Depot Sudbury is here to help no matter where your credit score currently stands.
Can I Qualify For a Car Loan With Bad Credit?
What Affects Your Vehicle’s Trade-In Value?
What Determines a Monthly Car Payment?
How an Auto Loan Helps
A major purchase with a fixed monthly payment plan is a great way to rebuild your credit and is exactly what an auto loan offers. As long as you stick to the payment plan, an auto loan is a great “vehicle” for regaining a positive credit rating. Though it’s not a quick fix, building up a history of small yet consistent payments on your car loan will improve things over time and increase your chances of qualifying for lower interest rates down the road.
Make Consistent Payments
One third of your overall credit score is determined by your payment history—not how much you can pay. A history of consistent payments looks far better to loaners than large chunks of cash paid here and there. The best thing you can do for your credit score is to make payments of the agreed upon amount consistently month-to-month. This, more than anything else, will build trust and demonstrate your ability to handle a loan responsibly.
Diversify Your Credit
Diversifying your credit means having different types of credit. Having a mixture of revolving and installment credit is a great start. Simply put, revolving credit comes from a finite pool of money that gets frequently borrowed and replenished repeatedly, while installment credit comes from a fixed loan that gets repaid in consistent installments over time. A credit card is a good example of short-term, revolving credit while an auto loan is a good example of long-term, installment credit. Having both is a great way to diversify your credit and thereby improve your overall credit score.
Keep it Simple
Slow and steady wins the race. Don’t overcomplicate things by moving your debt around or paying large lump sums in order to find a quick fix. A small amount each month is safer, better for you in case of an unexpected expense, and looks more appealing to loaners.
Never overcommit when deciding on your payment plan. It’s tempting to set yourself up to be free from debt faster but this is often a bad move. Paying off large sums right away may seem responsible, but this can make things more difficult for you in the long run and doesn’t look as good on your credit report. Always create an automotive financing plan that’s suitable for your budget and will never put you in the position of having to miss or make a partial payment. Remember, debt can be a good thing as long as you borrow within your means and can remain reliable in your payments.
How We Can Help
If you’d like to learn more about how an auto loan can improve your credit rating or have any questions about auto financing, come speak to our team at Auto Depot Sudbury. Our finance experts are here to help whether you have low, bad, or even no credit history at all. Life happens. Don’t let your past dictate your future. Apply for financing at Auto Depot Sudbury today and discover how easy it can be to get back in the green!