Will Buying A Car Help My Credit Score?
  • Post last modified:January 12, 2024

Buying A Car Help My Credit Score?

Buying a car can have an impact on your credit score – Here are 3 steps to buying a car with bad credit and how to repair your credit score simultaneously.

3 Steps To Getting Approved Fast And Repair Your Bad Credit History At The Same Time

Buying a car with bad credit can be difficult leaving you more and more frustrated and helpless because you know your credit history just isn’t where you want it to be when applying for a car loan. Also, if you do get approved you face higher interest rates which can hurt your credit rating more if you can’t manage the monthly payments on time.

Because all lenders do extensive research on potential clients with major credit bureaus hunting out any mistakes from your past, can make your situation worse. This leaves you feeling helpless and frustrated.

But if you follow these three steps you will give yourself the best chance at getting approved fast & easily while at the same time repairing your bad credit history.

Factors That Influence Your Credit Score

Multiple loan applications are necessary when you keep getting denied but multiple credit checks negatively affect your credit. This situation makes you feel like you’re on a roundabout and can’t get off so here’s what you should do.

Finding the right institution when applying for a car loan with bad credit can be a lot of work. Tools like car loan comparisons and car loan calculators can help you make your decision but ultimately finding someone who will accept your bad credit shouldn’t be your goal, repairing your credit should be.

Getting bad credit auto loans can cause you to make impulsive decisions. If you have bad credit be careful with whom you choose to do business. Understandably, you need a car as soon as possible but a wrong decision can have long-lasting financial repercussions. A car depreciates quickly so you mustn’t be carrying around huge payments on a depreciating asset. It’s also important that the loan fees and loan terms you’re paying are reasonable for the type of car you have.

What To Do Before Applying For A Loan With Bad Credit?

It’s important to check your credit situation so you can properly negotiate. Before seeking outside help you’ll have to get familiar with your financial situation like the current credit utilization rate – how much you owe on credit cards divided by the credit limit and prepare some documents to get a loan. You’ll need to show your banking records where companies will look to see how you manage your money. They check your spending habits to see if you’re able to save and live within your means. Overdrawn accounts and insufficient fees are negative signs and ultimately affect your credit score.

You’ll also need to bring proof of consistent employment; you’ll generally need to show up with a year of current work experience. Financial companies are looking for an ability to generate solid, consistent income.

You’ll also need to bring documents reflecting any past loan with payment history and credit history. Make sure there is accuracy in your credit report too. Any history that positively impacts your chances is good to have. This will be closely looked at as companies inspect you. Lenders are looking for you to be consistent in at least making the minimum payments. Once you gather these documents you’re ready to see a broker.

Best Way To Getting Approved & Improve Your Credit Score Same Time

The best thing to do when buying a car with bad credit is to align yourself with someone who truly understands finances. A broker can help you identify areas where you went wrong and how to correct them. Financing a car is easier when you’re working with a broker to repair your bad credit.

Brokers help you identify where your money is going & whom you’re paying. They also help you source out finance deals so you can get better interest rates. Working with a broker is a great way to regain control of your financial future.

Brokers are buffers between you and the sharks of the financing industry. Don’t be afraid to thoroughly explore your options when it comes to getting a loan. Let the broker be a layer of defense between you and loan companies so you can find the best deal. They will help you develop a convincing and honest argument so you can get approved and get on the road sooner rather than later.

How To Avoid Missing A Payment?

Remember you’re buying a car not buying money. In your budget make sure you include running costs like fuel, registration, insurance, and ongoing maintenance (servicing) including repairs. Also, buying a new car vs a used car is different. A new vehicle comes with a warranty but a used car may not. Get my guide to buying a used car to help you find a reliable car.

Some car owners choose to open a separate bank account or get a cookie jar and deposit $30 per week to cover those emergency repair costs that sometimes arise when owning a used car. If you’re buying a European car you may want to increase it because parts and labor are usually higher. If you don’t do this you can end up having to spend your loan repayments on fixing the car and then end up with a late payment. Some consumers have found being 90 days late their credit score dropped 100 points after buying a car faster than any other reason.

How fast will a car loan raise my credit score?

Depending on how much your credit score took a hit in the past; if you have any existing debt, how many hard inquiries were performed to get the new debt plus other factors like credit mix usually determine where your credit score sits. Buying a car with new credit can raise your credit score but only if you have done all the right things in servicing and paying down the debt. It may take up to 30 days before seeing positive changes so do all the right things and be patient.

This article is general advice and information only.