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How Vehicle Loans Can Improve Your Credit Score

Bad credit score? Find out how one can rebuild their score through vehicle finance.

Posted on: August 13, 2018

Bad credit score? Find out how one can rebuild their score through vehicle finance.

When looking for a loan, you may have come across terms such as ‘bad credit score’ or ‘poor credit score’. These terms are usually followed by invitations to ‘improve your credit score’. So how does getting a vehicle loan improve your credit score?

Let’s break down the basics.

What is a credit score?

Your credit score is a record of your repayment history. It’s used to measure your ability to repay a loan and can help a lender decide if they wish to provide you with finance. An excellent repayment record is rewarded with an improved credit score. Failing to meet repayments lowers a credit score. The better the credit score, the more loans you may be eligible for.

So how can a vehicle loan improve your credit score?

Secured 🔒

A major advantage of a vehicle loan (as opposed to a cash loan) is that vehicle loans are secured. Should you be unable to meet your repayment obligations, the vehicle can be reclaimed by the lender to make up the part of or all the remaining loan balance. 

Length of the vehicle loan ⌛️

Lenders offer various repayment frequencies and loan lengths to ease your financial burden. If you can repay your loan on a weekly, fortnightly or monthly basis over the course of many years, it demonstrates you have an ongoing ability to meet your repayment obligations.  

Coordinate late payments ⌚️

If you anticipate an isolated late repayment, you may be able to reschedule that payment (provided you’ve contacted the lender and explained the situation). This may prevent any negative hits to your credit score.

Make way for the future 👓

Improving your credit score is a gradual process.  It is important to remember that your credit score will not change overnight. We hope this article has helped you recognise how a secured vehicle loan can improve your credit score.

For more lists, tips and hints check out our blog.

Safe travels. 😃🚘

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