How buying a car can help you build your credit
Are you interested in buying a used car and wondering how it can help build your credit? Or are you wondering how bad credit or no credit can play a role in purchasing a car from a dealer? At Car Credit Tampa used car dealership we have a guaranteed approval program for those with no credit or bad credit.
The first thing you should know is an auto loan can affect two things: your credit score and your credit report. But what exactly is the difference between these two? A credit score is a three-digit number that ranges from 300-850 on the FICO scale. This scale is the most commonly used credit-scoring model used by auto lenders. Your credit score indicates to a borrower how reliable you are. A credit report includes summaries of your monthly payments for all accounts (open or closed), a list of companies that have viewed your credit report, and any settlements you may owe as a result of a court judgment.
If you are not sure what your credit score is you can contact each of the 3 major credit bureaus- TransUnion, Experian, and Equifax- and receive a free copy of your credit report. This can be done for each bureau every 12 months.
An auto loan is considered an “installment account” on your credit report, which means it has a set repayment period. An installment account can either be an auto loan, home mortgage, or even a credit card. When you take out an auto loan it helps by adding diversification to your credit score. The diversification is part of your “credit mix” and accounts for up to 10% of your credit score, and although that does not seem like much it still helps more than it hurts.
The largest and biggest piece of the credit score- 35%- is made up of your payment history. When a car loan is attained you gain the opportunity to make a positive impact on your credit if you pay all the monthly payments on time and in full.
Since a car loan is such a large financial commitment it is one of the best ways to positively improve your credit and prove your credit worthiness as long as you are never late in your payments and pay in full every month. You can take your bad credit or no credit to positive credit by stopping in to Car Credit Tampa, Ruskin and Holiday used car dealerships, and we will help you in the right direction!