Having a good credit record comes in handy for when you want to apply for certain loan products. It determines the credit risks that are associated with loaning you money. Having a low credit score limits your chances of a loan approval, but there are many ways you can improve your credit score, one of them being a car loan. If you consistently pay your car loan installments on time, this will demonstrate that you are reliable with your money and can be trusted with future financing.
There are many factors that affect your credit score:
Are you able to make your payments within the agreed time and show that you are a reliable debtor? If you keep to the repayment terms over the course of your car loan, you’ll find that this will actually increase or improve your credit score.
Another factor to consider towards your credit score is the different types of credits you currently have. Do you have multiple credit cards, a home loan and a car loan?Though it can be a risk to take all of these on at once, if you can prove that you are reliable with each finance, it can prove to be very beneficial for your credit rating. It shows strengthens your credibility as a borrower because you’ve proved to different lenders that you are trustworthy with your finances.
Creditors also want to know how long have you had your loan for. If you have been consistent in paying towards a lengthy loan, it may be to your advantage, as a longer credit history can lead to a better credit score.
So if you’re wondering whether a car loan will affect your good credit score, now you understand how it can actually help you improve it. Just be sure to understand and follow all the repayment terms so that you can show you are reliable with your loans.
Want to press forward with a car loan or need more information? Get in touch with us today so we can help you with your new car purchase.