Having great credit means that you are rarely rejected when you need money. But not everyone has great credit. Even worse, most people don’t know how to improve their current credit score.
Did you know that one of the fastest ways to build your credit is through an auto loan?
It might sound counter intuitive, but it’s true. In fact, by picking the right auto loan you’re able to improve on any credit score, whether it’s good, average, or even bad credit.
That’s great news for those who want to improve their score but don’t know how. But before we tell you the secret to picking the right auto loan, you have to understand WHAT your credit score is. (skip to the bottom if you don’t want to wait to improve your credit!)
Your credit score is essentially a number that is calculated to estimate how you handle money. It’s based off of…
- Payment history: do you pay your loans back on time?
- Amounts owed: how much total debt do you have
- Credit length: how long have you had your lines of credit
- Types of credit: what types of loans do you have
- New credit: have you managed your credit for a long period of time
The importance of each item is illustrated below:
How to use an auto loan to your advantage
Now that you understand a little bit about how your credit score is calculated, let’s look at how an auto loan can help improve your score.
- By taking out an auto loan, you begin to grow a new line of credit, which is 10% of your credit score.
- Auto loans are also considered a different type of credit compared to most debt, which is another 10% of your credit score.
- Finally, when you make consistent payments on your new auto loan, you’ll be affecting 35% of your credit score.
Doing the quick math and that means you’re able to affect over 50% of what makes up your credit score. That means with an auto loan, you’ll be able to quickly build your credit or even turn around previously bad credit.
The secret to picking the best auto loan to build your credit fast
When you’re ready to improve your credit quickly, the best way to do it is by searching for the right car loan that fits you.
But there are a lot of different loans and loan sites online, it can be overwhelming to even start!
Don’t worry, Car Loans Now is constantly researching the best auto loans for responsible Canadian Drivers like you. Their helpful team is here to guide you to the perfect loan for your needs and get you on the road to better credit, today.
All you need to do is fill out a quick, no obligation form to see what you qualify for and get started building your credit immediately!
Don’t wait, the sooner you sign up, the quicker you can improve your credit.