For many consumers, car loans are a financial obligation. Yet they can actually be more than that, by helping to improve consumers’ bad credit enough in order to give them greater financial security in the future.
According to the Los Angeles Times’ financial advice columnist Liz Weston, applying for a car loan and making the payments can be key to rebuilding credit. A young contractor working in Iraq with bad credit wrote into the column asking for advice. Although the man had paid off his student loans and credit card bills, his score was still not where he wanted it to be – not enough to allow him to invest in real estate when he came back home. So the columnist advised that he arrange for a car loan that would allow him to build his score back up. “An installment loan such as a car loan can indeed improve your credit scores as long as you make the payments on time and don’t overextend yourself” she told the contractor. Every payment one makes on their car loan improves their credit score.
Those with bad credit should know that they’re often pre-approved for a car loan – and these can be the key to getting their score back to where they want it to be.