Here's How You Can Rebuild Your Credit With A Car Loan
January 16 2018, Jessica George
Driving a reliable vehicle can make life a lot easier and offer you opportunities that you wouldn't be able to take advantage of if you didn’t have a ride. Having credit issues is pretty common, and many people believe that getting a car loan isn’t possible if you have “bad credit”. In fact, securing a car loan is a good first step in rebuilding your credit score.
Here’s how a car loan can benefit people with bad credit:
Rebuild Your Credit Score
Securing an auto loan is an important first step to rebuilding your credit score. When you consistently make your monthly payments, your credit score will start to improve gradually. Showing that you can make payments on-time, all-the-time is a key factor in determining your credit score. It won’t happen overnight, but if you’re diligent with making payments, your credit score will start to climb before you know it.
Types of Credit Checks
When looking for an affordable car loan, it’s important to know the different types of credit checks available to you— hard and soft. The biggest difference between them is that one can negatively affect your credit score (hard), and the other (soft) has no impact at all.
Soft credit checks generally occur when an individual inquires about their own credit score, or during a background check. As an example, an employer may pull your credit report as part of their hiring process. In this case, they are generally just looking to verify information about you.
A hard credit check is when you request a loan from a lender. When you apply for a car loan, the lender will check your credit history before deciding on whether to approve you for a loan or not—this is an example if a hard credit check. Your credit score will take a negative hit each time a hard credit check is done on your credit history. It’s often temporary, but if you apply for a car loan at a handful of dealerships in a short period of time your credit score will definitely be affected.
“Not only will multiple inquiries continue to lower your score, that kind of activity will make you look like a "credit seeker.” - After Bankruptcy Canada
Getting an affordable auto loan and a reliable used vehicle is a big step for anyone, but it’s just the beginning. As you make your monthly loan payments and pay your other bills, your credit score will gradually improve. In a few years, there’s a good chance you’re going to need a different type of vehicle that can fit your growing family or something that’s more rugged and capable that you can use to go hunting. There’s a good chance you’ll be able to trade-in your current vehicle and trade-up to something more suited to your needs. If you’re content with your current vehicle, in a couple of years, we can look into refinancing your car loan to get a better interest rate for you and lower monthly payments. As you can see, there are many benefits to working hard and rebuilding your credit score.
Getting an affordable car loan could be the first step to rebuilding your credit score. Contact Jessica today if you’re looking for an affordable loan or simply a little professional advice.