Can I Improve My Credit With a Car Loan?

Simply Put, Yes, a car loan is a great way to rebuild your credit score.

An car loan is typically reported to Transunion and Equifax as an installment account. Other types of installment accounts include mortgage loans and student loans. Those are payments of the same amount, made for a set number of payments each month or bi-weekly depending on how you set up your loan. Getting a car loan may help your credit profile if you don’t already have an installment loan.

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. So, by getting a car loan and keeping up with your payments, you’re impacting more than half of the things that influence your overall credit rating.

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