Rebuilding Your Credit

Having a bad credit score can seem impossible to escape – you need to take out a loan or loans in order to rebuild your credit, but because of your bad credit you can’t get a good loan. It can feel like there is no way to improve your credit, which can seriously affect your life and general happiness and wellbeing.

Luckily, there is still one good way to start building or rebuilding your credit through a manageable, short-term loan: take out an auto loan through one of your nearbad credit car dealers.

These dealers specifically work with customers coming in with bad or no credit, and the loan programs they offer are designed to both protect the lender and be affordable for the consumer. As a result, many bad credit customers are able to effectively use their bad credit auto loan to repair a damaged credit score. 

First, Secure Your Loan

When shopping for a bad credit auto loan, it’s typically a good idea to try and shop locally. Nearby and neighborhood lenders are more likely to give out a loan to someone with a history in the nearby area, and who will be easy to contact in the event of a problem. By choosing a nearby lender, you facilitate easy communication and generally make the process a lot easier to process for the lender.

You should go into the loan negotiation confident and knowledgeable. This means not only having a firm grasp of your credit score and what kind of interest rate and monthly payments you should expect, but also being generally knowledgeable about how the lending system works and what kind of reputation your lender has. Try to have your ideal loan terms already visualized prior to beginning negotiations; his gives you a good benchmark to stick to and can help you avoid overpaying or agreeing to unfair loan agreements.

In the interest of securing a good interest rate, it might be a better idea to put as much money into your down payment as you can. This way you will be paying less in interest in the long run, your monthly payments will likely be smaller, and, most importantly, you;ll inspire confidence in the lender regarding your ability to juggle your payments and act as a responsible borrower.

Next, Pay Your Loan Back

This is the simplest but honestly the most crucial part of the bad credit auto loan business: paying back your loan on time, every time. Missing even a single payment can damage your credit rebuilding efforts, and so it is vitally important that you make sure to pay each monthly payment by its due date, if not a few days before. Paying your bad credit auto loan on time can drastically change your life by allowing your credit and borrowing power to increase, giving you opportunity to possibly buy a house, lower interest rates, buying a newer vehicle in the future, or opening a great credit card that gives rewards points, which can save you money.

Some financiers recommend making double monthly payments or, at least, paying extra each month to help eliminate your principal more quickly. This is a good idea for several reasons, including the money you will save on interest and the confidence it will inspire in your lender as to your ability to repay the loan on time. Whether or not this will help your credit score is unclear, however, as early repayments are generally not reported to credit bureaus. It is also important to look out for prepayment fees in your contract, but otherwise, this is a fiscally sound plan to pay off your plan early.

These are fairly simple tips, but following them through can work wonders on your poor credit score. After all, your credit score is built on your real-life borrowing habits, and there are few better ways to demonstrate that you’ve turned around bad past borrowing behavior than with a well-managed auto loan.