When committing to an auto loan at a Buy Here Pay Here dealership, their participation in credit reporting is the fundament required to boost your credit. Otherwise, you may find yourself in the middle of a bad credit car loan. Buy Here Pay Here financing can help improve your credit score under one condition: the BHPH dealership you choose to do business with must report loan payments to the credit bureau. Once you have confirmed the dealership does in fact report all payment transactions, you are one step closer to raising your credit score and becoming a trusted borrower from a lender’s perspective. Let’s discuss the factors that affect credit and how to work toward developing a positive credit standing with national financial institutions.
Factors That Affect Credit Scores
A Buy Here Pay Here dealership utilizes in-house financing, which means they are both the dealer and the lender. As a credit-challenged buyer or someone with no credit at all, there can be many benefits to financing with a BHPH dealership, like AutoSmart. Before looking deeper into ways to improve your credit it’s important to take note of the five factors that determine a borrower’s credit score:
•Payment History accounts for 35% of an individual’s credit score.
•Amounts owed accounts for 30% of an individual’s credit score.
•Length of Credit History accounts for 15% of an individual’s credit score.
•New Credit accounts for 10% of an individual’s credit score.
•Credit Mix accounts for 10% of an individual’s credit score.
Signing for a car loan can affect a number of these factors mentioned above. If you do not have a credit history or have poor credit history, making one-time car payments can pave the way for an optimistic credit future. If your length of credit is short, signing an automotive loan only increases the longevity of building stronger credit. New credit is also a favorable mark toward a better credit score because borrowing money demonstrates you are making a commitment to repay the loan in order to increase your financial standing.
Improve Your Debt to Income Ratio
You know what they say about small changes adding up over time: every timely one-time payment submitted pushes your credit score in the right direction. As long as the Buy Here Pay Here dealership reports to the credit bureau, your auto loan will show as a line of credit on your credit report. The only way to improve your debt to income ratio is to continue to make your car payments on time each month to lower the debt amount.
High-risk borrowers should always expect a higher interest rate when it comes to any loan because they put the financial institution in a riskier position. Once your credit score has improved by paying your monthly car note consistently for a good amount of time, refinancing your automotive loan may be a good option. Financing with a trusted BHPH dealership doesn’t only improve your credit, this decision can also transform your credit standings with trusted lenders, and even provide you with more borrowing opportunities in the future.
At AutoSmart, we are proud to report payments to the credit bureau for our loyal customers. We are committed to protecting consumers from BHPH dealerships that offer bad credit car loans. We can help you begin building a strong credit standing. Together we work toward securing a positive credit future one payment at a time.