How Buying A Car Can Help Repair Or Establish Your Credit Score
Your credit score is a numerical representation of your financial responsibility. To lenders and creditors, it indicates how likely you are to pay your debts on time and as agreed. A higher credit score means that you may be more likely to pay your bills on time, and this presents less risk to the lender. When you have a lower credit rating or minimal credit history, you may find it challenging to get approved for affordable financing. Credit scores can also impact insurance rates, your ability to get approved to rent a home, and more. If you are thinking about buying a new car, you understandably want to know if this will improve or damage your credit rating before you sign on the dotted line.
The Short-Term Impact
When you apply for a car loan, your credit score may decline slightly for a few months. This is because there will be a hard pull on your credit report. Essentially, a hard pull indicates that you actively applied for financing regardless of whether you took out a loan or not. The good news is that shopping around for a loan with several lenders within a small window will have the same impact as applying with one lender. Due to this, you should not let this deter you from comparing options to find the best financing offer available.
The Long-Term Effects
The short-term impact of taking out a new car loan is minimal compared to how the new loan will affect your credit rating going forward. Your new loan provides you with the opportunity to prove that you can manage your finances responsibly. As you make your payment on time each month, you build a positive credit rating. On the other hand, if you make late payments, your credit rating could drop. With this in mind, it is essential to set up a loan with affordable monthly payments. It is also a good idea to establish a small nest egg in a savings account. If you ever find yourself short on cash one month, you can use your nest egg to make your payment on time.
Our financing team at Holman GO is available to help you locate affordable financing. Regardless of your credit rating, we can work with you and help you to learn about options that you may qualify for. If you are ready to buy a new or pre-owned vehicle, you can get started by applying for financing online or through our website today.