Fixing Your Credit With a Car Loan: How-To

If you are dealing with a bad credit score, chances are you're constantly thinking about how you can fix it. After all, credit is needed to do most things, even when you are not looking for a loan. Things like houses, apartment rentals and more all usually require a credit score of a certain level or higher. In addition to this, your insurance rates, house qualifications, and even your job may depend on your credit history and how high or low it is. If you're in need of a car to drive and are also looking to increase your credit score, we believe the best solution is getting a car loan. Good Fellow’s Auto Wholesalers suggests this, as you are able to achieve two things at once and get the best deal possible (so long as you buy at our dealership!). If you are not sure how a car loan can help fix your credit, we have come up with a guide below.

How Credit Works

Since you need credit to get a loan, it can be confusing to hear that obtaining a car loan can, on the flip side, increase your credit score. Understanding how credit works can better equip you to make choices that positively affect your credit profile.

The history of your payments is listed in your credit report and this lets lenders or other companies know how well you are able to follow up with a payment plan. There is a notation placed in your file every time you are late on a payment, or when a payment is missed. The more marks, the worse your credit history appears and vice versa.

How much you owe overall is also listed on your credit report. This shows companies if you are overextended compared to your income, or if you are able to add another payment comfortably. Lenders can also see if you have any accounts that have been placed or collections or in worse cases, had a judgment awarded.

Hard Inquiries & Getting A Loan

Anytime you get a loan, regardless of the type, a hard inquiry is listed on your credit. Hard inquiries have a negative effect on your score, but the good news is that they do fall off of your report after a year, so they don't stay for long. It is common to shop around when looking for a car loan, and when there are several hard inquires of the same type within a 1 or 2 week period, they are converted into a single hard inquiry. This helps you avoid damaging your credit score greatly while seeking a car loan.

Using a Car Loan to Improve Your Credit

Securing and paying a car loan on time is a significant way to help improve a poor credit profile. It is important to remember that purchasing a car is a considerable commitment. It will increase your overall debt which will be listed in your credit report. While this isn’t a bad thing, it can affect future loan approvals from other lenders until the amount is paid off.

How a Car Loan Helps

Your credit score will decrease slightly right after being approved for a car loan, which is normal. Once you begin paying your car payments on time, your score will start to increase at a steady pace. Installment loans paid on time have a very good effect on your credit rating. Not only are they a part of a good credit mix, but they also appear as installment loans on your report.

How Our Team Can Help

When you require some of the greatest auto financing services in all of Toronto, look no further than our dealership at Good Fellow's Auto. With our team, it's never been simpler to find the

best car for your buck. To find out more about our Any Credit Car Loan services, be sure to visit our official site today.