Will a Car Loan Help Build Your Credit Score?

Will a Car Loan Help Build Your Credit Score?

Posted on March 8, 2023

Your credit score has huge influence over your life, from what bank accounts you can get to where you can live. Maintaining a high score is in your interest regardless of whether you want to access credit or not.

But how can a Port Dover auto loan help you rebuild your credit score?

First off, we don’t encourage those in financial difficulty to borrow more. We are merely highlighting that successfully managing an auto loan can help improve your credit score.

Here’s how.

Rebuild Credit Score with a Car Loan

There are a couple of ways an auto loan can help rebuild your credit score.

Creating a positive payment history

By successfully managing your auto loan, you’re building a positive payment history month by month. The longer it goes on, the higher your score will climb.

Your payment history makes up around 30-35% of your credit score. The more you pay on time, the more it benefits your score. Of all the ways to improve your credit score, your payment history has the most influence.

Credit mix

An auto loan forms part of your credit mix. This is an assessment of the various types of credit you use. The wider the mix, the more positive the influence. That means using more credit options, across credit cards, loans, overdrafts, mortgages and other credit.

This makes up around 10% of your score.

The aim of leveraging credit mix is to spread credit around without building up too much. You have to be careful though. Take out too much credit and it will negatively impact your credit utilization.

Let’s not worry about that too much right now as we’re concentrating on how auto loans can help rebuild credit.

Both of these things can eventually open up a wider pool of credit from more lenders. Once your score improves, you should be able to get cheaper loans and access more competitive finance products.

Improvements won’t be overnight though. Expect to wait around 3-6 months for your score to begin climbing. Once the lender updates your record with a successful payment, your score should increase incrementally over time.

Use other credit building techniques to complement the auto loan and you could be enjoying a high credit score in no time!

Auto loans and affordability

If you have bad credit, we can help secure competitive car loans for almost any car. As long as you can afford the repayments and can prove you can afford them, we can find you a loan.

As bad credit car loan experts, our Port Dover auto loan team have many years’ experience helping people from all walks of life access auto loans.

As a trusted car dealership network in Canada, we can find you the car to buy with it too!

When you’re ready for a car loan, get in touch with the Delhi car loan experts at Northway Ford for great deals on auto finance.

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