How Buying a Car Can Help Repair Your Credit Score
We have seen many people with poor credit records rejecting the idea of buying a new car. They believe that either their car loan applications would be denied or they would unfairly be paying higher interest rates. While both scenarios can happen, purchasing a new set of wheels can actually help you raise your credit score. We’re here to explain to you how buying a car can help repair your credit score.
How a Car Loan Can Affect Your Credit Score
Despite having a steady income and a stable job, dealers are likely to reject you once they see your bad credit history. However, there are also considerate lenders who may be willing to finance the purchase of your vehicle. If you’re lucky enough to stumble upon one, be sure that you put on your best behavior and settle your payments on time.
Obtaining a car loan impacts your credit in two different ways:
- It can add to your credit history, which is a good thing, on the condition that you will always pay on time.
- It can add a hard inquiry, which means that some points from your FICO score will be shaved off temporarily.
As long as you pay as agreed, you’ll be able to offset the credit score points you lost with your on-time payments. Continue doing so and before you know it, you’ll see your credit history going up the roof.
Your Credit Report
On your credit report, you’ll find information about car financing based on reports prepared by Equifax, TransUnion, and Experian. You will also see two categories: type of accounts and current status.
Normally, car loans are listed as an installment account. Since part of your credit score is derived from credit mix, buying a car through loan can certainly help your credit profile.
As for the status, staying current by always being on time with your payment will significantly improve your credit score. If you pay 30 days late, not only will you be ruining your credit record but you’d likely get your vehicle repossessed by your lender.
It’s important that you check your credit report every once in a while. In doing so, you can pinpoint any possible errors that contribute to your low credit scores as well as potential identity theft. If you see any mistakes, be sure to make a duplicate copy and highlight the incorrect items.
You can get your free credit report from any of these sources: Experian, Free Credit Report, Nerd Wallet, and Annual Credit Report. To ensure that all your account details are being reported correctly, we recommend you get your copies every 12 months.
Fix Bad Credit in Other Ways
Are you suffering from poor credit? Here are 4 simple tips to help you remedy the situation:
- Pay down balances on your credit card.
- Pay all bills on time.
- Don’t apply for a new credit card.
- If any, dispute errors on your credit report.
Turn an Unwanted Vehicle into a Powerful Instrument
If you think it’s time to let go of an old vehicle, the best way to do so is by donating it to Veteran Car Donations. That way, you get rid of it conveniently at zero cost to you while getting rewarded with a handsome tax deduction once your car is sold at auction.
At the same time, you’ll turn your unwanted clunker into a powerful instrument that will bring immense benefits to the poor, handicapped, unemployed, sick, and homeless veterans in your area. The proceeds from the sale of that vehicle will help our IRS-certified 501(c)(3) charity partners in providing our nation’s heroes with mortgage-free and specially adapted homes, free physical and mental health care, employment opportunities, job training, transitioning assistance, tutoring support and education scholarships, financial assistance, and many other benefits.
You can donate to Veteran Car Donations by either calling us or filling out our secure online donation form. We accept vehicle donations wherever you are in the United States since we have car donation programs in all 50 states.
Give Your Old Car a New and Worthy Purpose
Now that you know how buying a new car can help repair your credit score, it’s time to let go of your old automobile. Call us at 877-594-5822 and make a difference in the lives of our struggling veterans with your car donation!