Can A Car Loan Help To Repair My Bad Credit? Yes!
Even if you don’t often give it much thought, your credit rating is crucial to you. It will dictate what kind of interest you have to pay on your credit cards and it could play a deciding role in your aspirations to someday buy a home. Dealing with a past bankruptcy or consumer proposal is a very common among Canadians and improving your credit rating should be a top priority after a discharge.
So, when things get back to normal, you have to deal with how to improve your credit rating. Of course, the first thing to do is to make all the payments for anything that is overdue to bring your accounts back into good standing.
But then most people assume the best thing to do is to avoid using credit and wait for your score to come back up. Of course, staying on top of your debt obligations and making all your payments on time will be of primary importance in rebuilding your credit. Getting a car loan and successfully managing the repayment of that loan, along with your other debts, will go a long way towards getting your rating back on track.
The length of your credit history and new credit are also contributing factors to your score. A longer credit history suggests a lower risk because it shows that you have experience successfully managing your credit. Some suggest that you should keep your credit cards active, even if the balance is zero, by making an occasional purchase with it and making sure it is repaid on time, to increase the average age of your accounts. Making several applications over a short period might suggest a desperate need for funds, and therefore a higher risk. Applying for a car loan won’t have a significant negative impact here if you haven’t also made several other credit applications recently.
The last aspect that makes up about 10% of your credit score is the different kinds of credit you use. There are three different types of credit you can have: revolving credit like credit cards or lines of credit; mortgages and car loans. The objective is to have a diversified mix of credit. If your credit is only made up of revolving credit products, it may have a negative impact on your score. Adding a car loan will show a new mix of credit and will help improve your score.
How a car loan can improve your credit score
Creating a new mix of credit on your report is always advisable. Your overall credit score is made up of several different sections, and about 10% of your credit score reflects the type of credit you’ve utilized. Credit cards only represent one type of credit usage; car loans can make up another significant portion. A car loan got with the help of Bankruptcy Canada’s auto loan partner can increase your credit history and increase your credit score.
How an Auto loan through can show Responsible Credit Usage
A car loan can be seen as a building block for your credit history and as a means to access larger purchases.
Using our approved car loans partner, will help build a solid history for chasing bigger dreams later on down the line. Buying a house could become a reality faster if you have an auto loan. If your credit report shows evidence of on-time payments, it will help increase your credit score. Furthermore, paying your monthly payments on time every month may help to get your interest rate lowered after 8 months.
By getting Bankruptcy Canada’s car loans partner to work with lenders to get you a car loan shows a new mix of credit, and if you make payments on time, it shows that you’re less of a risk to loan officers and banks. A car loan also shows your potential creditors that you know how to responsibly handle all kinds of debt.