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Hamilton: Do car loan payments help your credit score?

Hamilton: Do car loan payments help your credit score?

We all know that your credit score influences how much of a car loan you can get but can paying back a car loan help your credit score?

Yes it can!

Servicing any debt successfully can positively impact your credit score. Just how much it helps is often down to the size of the loan and the credit bureau doing the calculating.

Hamilton car loan payments and your credit score

Your credit score is a numerical measure of your credit history. A large portion of that score is made up from loan payment history. If you always pay your debts on time, your score climbs. If you miss a payment and it is recorded on your history, your credit score dips.

As a Hamilton car loan is a debt that involved regular payments, making those payments on time every time will help your score.

If you’re the forgetful type, managing debt payments can be trick. Life is busy and we all have a lot on our plate. It’s easy to miss a payment even if you have money in the bank.

You have two simple tools at your disposal to ensure you always pay on time.

They are:

Automatic payments – Set up automatic payments when you set up the car loan. That way, the money is taken out of your account each month without you having to remember. We recommend everyone uses automatic payments as it’s the easiest way to pay the car loan.

Set a payment reminder – Use Outlook, use your phone, use a calendar app or something else. Either way, setting up a reminder on a device you use regularly will help avoid missing payments. It’s a poor second to automatic payments but it works!

Will repaying the car loan in Hamilton early help your credit score?

Not always.

Repaying a loan early demonstrates you’re potentially a low risk when it comes to lending. This can benefit you when it comes to shopping for car loans in Hamilton.

It can also lower your debt ratio, which is also a benefit. Neither of which will necessarily affect your credit score but may increase your chances of being accepted for a loan.

You may find paying off your car loan early may lower your credit score slightly. As your score is partly made up of your credit mix, i.e., the type and variety of credit you use, having a narrow mix can, for some reason, impact your score.

Not all credit bureaus work this way though so there is no hard and fast rule.

If you pay off your loan, you are then potentially able to pay off other debt. Depending on how much you have, lowering your overall debt can help increase your credit score.

Complicated we know!

Essentially, paying a car loan in Hamilton will have a minor positive effect on your credit score. That’s especially true if you have a few successful payments behind you.

If you need help or advice on anything to do with car loans, contact Car Nation Canada today, we can help!

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