How Paying Your Auto Loans Can Help Your Bad Credit Rating
Credit is an important factor in many areas of life. Good credit can help you pay less for insurance, get better interest rates on loans, and may even help you secure a better-paying job. Unfortunately, millions of people are experiencing the downsides of poor credit. However, there’s good news: by taking on and paying an auto loan, your credit can be greatly improved. Here’s how the process works.
Good Debt vs. Bad Debt
Most people are probably aware that all debt is not created equal when it comes to your credit score. Mortgages are generally considered to be a more favorable type of debt, while credit cards often have higher interest rates and a multitude of fees, making this type of debt less favorable. Auto loans exist in their own category, but are still consumer debt.
How Auto Loans Affect Credit
Credit cards are one variety of credit, auto loans are another, and mortgages are a third. To have a better score, the types of credit you use need to be diversified. This gives you an opportunity to build a stronger credit history by demonstrating responsibility through consistent, on-time payments.
Building Good Credit through Responsibility
Credit cards are typically a good first step in the rebuilding process, but it’s important to take on a larger loan in order to continue building good credit. Keep in mind that taking on a loan before you’re prepared to make the payments can be catastrophic to your credit score as a single missed payment can cause a large drop in your score.
Maintaining prompt payments on a large loan is essential to showing future creditors that you’re responsible and stable enough to make larger payments in a timely manner. Having a good payment history for a car loan is an indicator that larger payments for a mortgage are feasible for you. Lenders look very carefully at payment histories for auto loans in order to assess your credit worthiness for other loans.
Reliable Auto Sales
At Reliable Auto Sales, our staff is looking forward to serving your auto needs. We’re eager to help you get into a pre-owned vehicle from one of the largest pre-owned inventories in Nevada. We provide a hassle-free car buying experience and excellent service. If you’re looking for a great pre-owned vehicle, come see us! We’ll be happy to answer your questions and get you started on the road to your next vehicle and an improved credit rating.