|HOW CAR LOANS CAN IMPROVE CREDIT|
|Posted on: Apr. 18, 2015 in Car Loans|
There are a variety of ways that you can improve your credit score, including paying off your car loan. Not only will you finally own your car, you’ll finally be able to say that you have good credit. The way your credit score is benefitted is not through paying off the actual loan, but from the automobile’s payment history and your management of the installment debt that will be reflected on your credit report for the next several years.
The way that you can get the most out of your credit score is by fully understanding the different kinds of debt and how having a blend of each can help you in the future when you decide to make another big purchase. All of the payments that you make on the car loan are what’s known as installment debt, which is a debt that you pay off in regular installments. Another common type of debt is revolving debt where you make payments on all of the debts that you’ve racked up over time and don’t have to be paid off before a certain date. You look more versatile and well-rounded when you have both installment debt and revolving debt on your credit score. Both of these debts also make up ten percent of your overall credit score.
History of Debt Payments
Your car loan’s payment history has more influence on your credit score than the act of actually paying off the loan. Each time that you make an on-time payment on installment debt, your credit score steadily improves. There’s nothing wrong with paying off your car loan, but if you’re looking to really improve your credit score you might only want to make the minimum payments until you get your score where you’d like for it to be. Just make sure that you make all of your payments on time. Any payments that are made 30 to 60 days late will decrease your credit score. Your payment history for the last two years accounts for 35 percent of your overall credit score.
Besides paying off your car and improving your credit, future lenders who are trying to decide whether or not they will offer to finance you or offer you credit will notice on your credit report that you not only took out an auto loan in the past, but also that you successfully paid it off. A credit score that indicates that you’ve made late payments might be the thing that causes you to lose financing.
If you don’t have a car loan, work on paying off your credit cards on time, preferably more than the minimum amount and more than one payment a month if it’s at all possible.
If you need auto financing but your credit is keeping you from getting approved, CreditYes can help! We can match you with a dealership in your area that will be with you every step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!