Do Car Payments Build Credit?

While a car loan in itself doesn’t build credit, you can use a car loan to help increase your credit score as long as you pay off the debt on time. However, if you miss payments or fail to make payments on time, a car loan can hurt your credit.



Car Loans and Your Credit

A car loan is typically added to your credit report as an installment account, which means you pay the same amount every month for a certain amount of time. This is different from revolving credit, which is an open line of credit that has continually changing balances and payments, such as a credit card. Credit bureaus may look favorably if a consumer uses different types of credit. If you don’t already have an installment loan on your credit report, getting a car loan could create a better mix of credit and help your credit profile.

If you make your minimum payment on time every month, your credit report will state that your car loan is either “paid as agreed” or “current.” Since your payment history has the biggest impact on your score, this positive status could considerably improve your total score. However, if you miss a payment by 30 days or more, you risk having your vehicle repossessed and damaging your credit score. To discuss your credit score and your individualized payment options and structure, please contact our finance team.

Getting a Car Loan Without Good Credit

If you don’t have a good credit score, or you’re just starting out and have little to no credit history, you could have difficulty getting a car loan at most car dealerships or credit lenders. In this case, an in-house financing dealership like North Coast Auto Mall of Cleveland might be able to help. In-house financing dealerships, sometimes also referred to as buy here pay here dealerships, can offer you direct financing. Since the dealership finances the car purchase, it doesn’t have to get approval from a bank or other lender to give you a loan. You’ll be able to work with our finance team who can better understand your history and configure a plan that works for you and your budget.

Applying for a Car Loan

When you first apply for a car loan, your loan application will be shared with several different lenders. A hard inquiry, which is a record showing that someone has reviewed your credit report, is added each time a lender looks at your credit. Even though hard inquiries made on your credit report can cost you points on your credit score, you’ll gain more points if you make on-time payments once you receive your car loan.

Some credit scoring systems understand that you’re only buying one car, so they’ll count multiple inquiries as only one inquiry. Additionally, some of the newest credit scoring systems don’t count car loan inquiries at all. However, if you want to ensure your credit score loses as few points as possible, you should try to keep all inquiries within 30 days when you’re shopping for a car loan.

Discuss Your Personalized Finance Options with North Coast Auto Mall

Even though a car loan doesn’t build credit on its own, keeping up with your payments and creating a solid payment history can help you improve your credit score. At North Coast Auto Mall of Cleveland, we specialize in helping drivers find a car at a reasonable price, personalized to your credit history and unique situation. Our team understands the hassle of getting a car with troubled credit. Our finance team can work with you to understand your situation and find you a car you love. Stop by our dealership today to explore our excellent selection of makes and models and learn about the financing options we have available.


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North Coast Auto Mall - Cleveland, Brookpark Road, Cleveland, OH, USA

North Coast Auto Mall of Cleveland 41.419119, -81.724152.