Many Chicago drivers have dealt with credit challenges over recent years. If you have bad credit, there are several things you can do to improve your credit score. One of the best ways to improve your credit score is to make your car payments on time.
Why should you care about your credit score? Your credit score directly affects your ability to get a loan as well as the interest you will pay for the loans you do get. The higher your credit score, the lower the interest you will pay. In fact, if your current credit score is below 700, you may have a difficult time obtaining the best financing rates, which can equate to thousands of dollars in extra interest you will have to pay. Making your car payments on time improves your credit score.
When you pay your car payment late, or miss a payment completely, this will negatively impact your credit score. When you go to get another car loan, the lender will look at your payment history, and use that history to predict how you will pay off their loan. If they see a history of late or missed payments, they will likely anticipate you’ll pay their payments late or miss them with their loan as well. This perceived increased risk results in the lending institution charging a higher interest rate or not funding the loan at all. In contrast, making your car payments on time improves your credit by demonstrating your ability to responsibly pay back your loan.
Another negative factor in your credit score may be if you have no credit history or a short credit history. Making on time car payments can help build this credit history, allowing you to positively establish credit. This can be critical if you’re looking toward larger credit purchases, such as buying your first home. A car loan is typically easier to qualify for than a mortgage, for Chicago buyers with no credit history or a short credit history, especially if you have a down payment or a trade-in vehicle which gives you a financial stake in the purchase. As such making your car payments on time can be a stepping stone to your dream home.
