Why You May Need A Car Loan To Fully Repair Your Credit

The easiest way to rebuild your credit is to get a credit card, whether it is secured or not. This will add points to your credit report for on time payments, a low credit utilization ratio, and length of credit history. Despite all of these positives, a credit card may not be enough to pull your credit score very far above 600. You may need to secure an auto loan to do that.

The reasoning is that your credit score rises when you use different types of credit. Credit cards are revolving credit, so you can carry a balance. An auto loan is an installment credit. In addition, many car loans are higher balance loans than credit cards. This experience with higher balances helps you appear more trustworthy to lenders.

Additionally, if you are applying for your first car loan, you may be denied despite a good credit score. Auto lenders will look specifically for installment type loan history. A lack of it may prevent you from getting a traditional car loan with bad credit and no a co-signer.