Does Financing a Car Build Credit?

 

Drivers searching for a car loan around Burlington and Burlington Township have plenty to consider. Regardless of whether the vehicle is new or pre-owned, several factors can influence whether or not financing a car can build credit.

As you shop, Burlington Volkswagen wants to lend a hand in your search for a car near Willingboro, New Jersey. Our Volkswagen finance experts are happy to assist in providing clarification for your next car loan.

 

How a Car Loan Impacts Your Credit

It’s important to know that the car loan itself doesn’t build credit. Rather, when you apply and get approved for a car loan, your credit may slightly dip due to a hard credit check. When this happens, it’s a behind-the-scenes way for lenders to determine things like interest rates.

Once the car loan has been placed in your name and you begin making payments, your credit score will begin to rise. However, it’s critical to stay current with each monthly payment to avoid knocks on your credit score and late fees for any missed payments.

The more consistent you are with paying on time, the better. But far more factors can raise your credit score—or, in some cases, lower it.

Factors That Determine Credit Score
If you’re unsure how to build or raise your credit score, keeping these four factors in mind as you make monthly car payments and open new credit accounts is critical. Don’t hesitate to reach out to our finance center for more information, as you read below.

Payment History
Your payment history is perhaps the most significant factor impacting your credit score. As you pay accounts over the length of your credit, this system shows lenders how you keep up with bills, credit, loans, and more.
Payment history constitutes 35% of your credit score. This major factor is important to keep up with as it takes credit cards, retail accounts, car loans, and mortgage loans into account when determining your credit score.

Length of Credit History
You may have heard that keeping a credit card open for as long as possible is wise. This is because a long credit history leaves good marks on your credit score. It showcases consistent, on-time payments and healthy financial habits, ensuring approval for any loan or credit card you want to apply for.
Remember—the older the account, the better.

New Accounts
Although opening new accounts is welcomed, be careful not to open too many at once as this can quickly impact your credit score. As mentioned, with each credit account you open, you want to sustain them to help rebuff the impact of too many new accounts on your credit history.

Does Volkswagen Work with My Credit?

When drivers visit our finance center, they’re met with friendly faces who understand the importance of landing a deal that matches their budget. Our finance experts will work alongside you to learn more about your credit score, the financing you qualify for, and insights about building a healthy credit history.

Burlington Volkswagen is happy to help drivers better understand how car financing can build credit. Schedule a time to visit with our finance experts near Burlington, Burlington Township, and Willingboro, NJ.

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