There are two different kinds of debt- good debt and bad debt. Mortgages are considered good while credit cards are considered bad because of high interest rates and is revolving credit.

Rebuilding credit can take a lot of time and tenacity but actually obtaining a car loan is an easy way to help build your credit score.

But where do car loans fall into that category?

Some people say that car loans make more sense than buying a used car since the loan is backed by the value of the car and has very low interest rates. But getting a car loan is a bit more difficult than it is to get approved for a credit card.

When it comes to financing a car with bad credit, including both loans and leases, both affect your ratings just as any other type of borrowing affiliation. Car loans can help build your credit score by adding diversity to your account.

Credit Score

Your credit score is made up of several different sections.  10% of your score reflects the types of credit you’ve utilized, i.e. credit cards, car loans and mortgages. Mortgages and car loans are considered to be installment loans.

The goal is to have a mix of different credits to help improve the quality of your score. A car loan is just as good of an installment loan as a mortgage, since car loans can help boost your credit score.

If you have a good history of paying your bills on time, it makes it easier for you to get a car loan. The development of using credit to build a solid history for making a large purchase, such as a house, begins with an auto loan. And a car loan is usually the step that you need to help improve your credit score and a good tool to prove your credit worth and therefore your ability to payback a bigger debt when the time comes.

Improving Your Score

When a person has a low credit score, it makes it tough to get a loan. Fortunately obtaining a car low is a bit easier. Most dealerships have the best lenders that work with you to find the right interest rate for you.

They work with lenders to help you get the best deal when it comes to your car loan. No matter what your credit score is, they will get you into a quality pre-owned car and they will help you raise your credit score.