From zero to credit hero:

You just got the keys to your shiny new ride, and you’re ready to hit the road – but did you know that car loan could do more than just get you from point A to point B?  Here’s the deal: a car loan can be a game-changer if you manage it correctly. Over time, it may improve your credit history and could even open up better benefits down the line, like lower interest rates on future loans or credit cards.

Here’s a breakdown to help you understand how that monthly payment impacts your credit (and what to do about it).

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Adds variety to your credit mix

Your credit score loves diversity. Lenders like to see some variety on your credit report, and installment loans like car loans or mortgages show you can handle those steady, fixed payments like a pro. But keep in mind: when you apply, lenders may do a hard inquiry on your credit. That might knock your score down a few points temporarily. It’s totally normal and those drops typically only last a few months.

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On-time payments are like pure gold

Paying on time can be a great way to keep your credit looking good. Each timely payment can boost your creditworthiness, especially if it’s for a long-term loan, and significantly impact your payment history for up to seven years.

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Build long-term credit history

A car loan is often a long-term commitment, which helps you build a track record. And since credit history makes up a big chunk of your credit score, keeping that car loan in good standing for the full term can be a big win. Plus, if you’re a credit newbie, this can be a great start to show lenders you’ve got what it takes.

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Avoid common pitfalls

Car loans can be a smart financial move, but only if you play your cards right. Here’s how to avoid common hiccups:

• Missed payments: You could set up autopay or reminders to stay on track of your monthly payments.
• High balances: Aim to pay more than the minimum whenever you can – it’ll lower your balance faster.
• Debt-to-income ratio: Aim for a budget that can help keep your borrowing in check.

The key? Don’t let the car loan steer you off track - treat it like a chance to show lenders you’re reliable. Pay your monthly payments on time and watch the potential positive impact on your credit history.

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Drive toward financial success

A car loan can be a powerful tool for building credit, but it’s important to manage it responsibly. You could potentially start getting ahead by paying more than your balance and paying before your payment due date. Focus on the basics and trust the process! Managing your car loan might be an important step toward building a stronger financial future.

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_{Exeter Finance LLC is not a credit repair agency or licensed credit counselor. Exeter does not offer services to fix or improve credit scores. These tips are intended for general educational purposes and should not be construed as legal, financial, or credit repair advice.}