For most consumers, figuring out how to pay for a new car can seem like a stressful ordeal, and for drivers with little credit history or poor credit history, getting a new car can seem even more daunting. However, it’s important to know that there are plenty of credit options available to drivers with either little credit history or less-than-ideal credit history. In fact, financing a car can be an excellent way to improve your credit profile. But what is a credit profile, and how does buying a new car make yours better?
What is credit, anyway?
When you start shopping for a car, chances are you will come across the term “credit score.” Everyone’s credit score is a composite of several factors, including credit history, existing lines of credit, existing debt, payment history, and various other numbers. Basically, a credit score is a number that lenders use to determine the risk they’re taking on when giving you a loan. Generally speaking, higher credit scores lead to things like lower monthly payments or less interest on a loan.
How is a credit score improved?
Individuals with little credit history or a history of late payments or debt will often find they end up with interest rates that are higher than those for individuals with higher credit scores. Luckily, a poor credit score can be improved in a number of ways, including taking out a new line of credit and making timely monthly payments. Because of this, a car loan can be a fantastic opportunity to build your credit profile.
Building credit with an auto loan
Not only will an auto loan allow you to get the car you want without coming up with the entire price all up front, it will also improve your credit score if you stay on top of monthly payments. When buying a car in order to build credit, it’s important to make sure you never miss a payment, as this regularity is the key to improving your individual credit profile.
Visit Casey Credit to learn more about securing the right financing for your new car.