If you have bad credit or no credit history, building and establishing credit takes diligence as well as time. There are numerous ways to achieve a high credit rating one of which is, surprisingly, buying a new car.
Rebuilding your Credit
When an individual has a poor credit rating, attaining a loan or credit card can prove difficult. Auto loans, however, are easier to gain approval for. The reason for this is that dealerships are well connected with lenders and capable of finding pleasing interest rates for their customers even though the given rate may be a little higher than average. Another reason for this is that car loan lenders are protected by legally having ownership rights of the vehicle until the loan has been repaid.
If you take into consideration the formula used in calculating credit scores, car loans are ideal in fixing and establishing your credit rating. Payment history is 35% of your score while another 10% consists of diversity, what this means is that a having a payment history via a car loan helps improve your credit by two separate methods and categories.
Car loans are also useful in building and rebuilding credit in that, unlike credit cards, spending does not have the potential to get out of hand. The purpose of a car loan is simply providing financial assistance and support but nonetheless the way car loans are designed helps establish and maintain good credit ratings. Credit is needed in order to have a solid credit rating and car loans do not revolve as credit cards do, your financial well-being cannot be hurt by making unwise purchases via a car loan. Auto loan payments are the same amount every month and the borrower does not have access to any extra funds and credit.
Whenever you taken out a car loan, it is more than important that you make your payment by the due date every month. If you ever take out a car loan, you should make sure not to use the grace period which gives you extra time to make the monthly payment, paying later than the due date can hurt your credit score in the long run.
Using Car Title Loans
Car title loans are a little different than regular car loans but nonetheless also a way of improving, building and rebuilding your credit rating. Many car shoppers do not realize that gaining approval for car title loans is more likely than being approved for a car loan by a financial institution if their credit score is poor. If you obtain and successfully pay off a car title loan, you can gain eligibility for personal and traditional loans. If you have poor credit, it can have a negative impact on many areas of your life, from getting a job and buying a home to renting an apartment and making other large purchases.
Companies will seldom trust an individual which has a low credit score. If you have not made your payments on time on a home loan or on the rent of an apartment, companies and financial institutions will consider you to be an “at risk” individual who may not be trustworthy as well capable of repaying debt. Meanwhile a car title loan helps to show creditors that you can be trusted and that you are capable of making your payments by your due date. When a person takes out a car title loan, lenders report the person to the Credit Bureau initially and again if payments are made on time. Late payments are also reported to the Credit Bureau so you should always be careful not to miss the due date and careful when you obtain a loan, if you have any doubt that you can’t make the payments on time you more than likely will be negatively affected.
Car title loans typically are approved within a few hours, allowing you to have an extra sum that you have a desperate need for. A car title loan looks good to the Credit Bureau and also shows that you are a responsible individual.
Bear in mind that car title loans allow you to keep the vehicle, your car is collateral during the repayment period. Contrarily, if you fail to repay, you don’t get to keep your car and any money you have paid back.
In summation, these are just a few of the reasons why car title loans and car loans can help you to fix your credit, if you are having a hard time getting approved for an unsecured loan or obtaining any type of credit, buying a new car with an auto or title loan is something you may should consider.