Buying Back Good Credit With a Used Car Loan
Buying Back Good Credit With a Used Car Loan
Posted on January 25, 2024
Financing a quality used car through a reputable used car dealer can be a great way to improve a lagging credit score. A low credit score can sometimes make it seem difficult to purchase a vehicle, but there are options, no matter how low a credit score has fallen.
Credit scores fall due to many reasons. The best way to raise a falling score is with good positive payment reporting on a credit account. It can be very difficult to get that credit account with a low score. There are very few credit products available to those with low credit scores. Most banks will require a security for loans to anyone below a certain credit threshold. In most cases, these secured loans will not positively affect a person's credit score, no matter how diligently payments are made.
One solution is with a quality used vehicle. Used car dealerships often have relationships with many lenders and can easily handle both the purchase and the financing of your vehicle in house. Often they work with lenders who specifically assist those with low credit scores in purchasing a vehicle.
These types of car loans may require minimum down payments or cost a little more over the life of the loan, but they have two major benefits for the lower credit consumer.
Firstly, a low credit car loan through a lender that a car dealer has a good relationship with may allow an individual to purchase much need transportation which would otherwise be unavailable to them.
Secondly, and more importantly, even though these loans may cost a little more over time, these lenders work with credit reporting agencies, reporting on-time payments and helping raise a credit score over the course of the loan.
With on-time payments, the slightly higher fees associated with a low credit score loan through a quality used car dealer allow a consumer, essentially, to "buy back" a good credit score.