The main reason a car loan is a good way to build and improve your credit score is because, as you make payments on time, you begin to build a positive payment history.
Auto financing also adds to your credit mix and new credit, which make up a combined 20 percent of your credit score.
How does financing a car affect your credit?
Taking out a car loan can affect your credit in a number of ways. When you start making payments this increases your credit utilization, which decreases your credit score until the loan is paid or when the balance is 30% or less of the original loan amount.”
Do car loans help build credit?
Buying a car can help you build a positive credit history if you pay the debt on time and as agreed. Failing to pay on time will hurt your credit. But the first item people often worry about is an inquiry. As you begin to make payments on time and show that you are responsible with the debt, your scores will increase.
Photo in the article by “President of Russia”