If you need to re establish your credit, an auto loan is a very good way to do so. Usually a home loan is the biggest influence on your credit followed by an auto loan. The thing is, you can pay down a car quickly and trade it off within a short period of time. It also is a relatively quick process to get an auto loan vs. trying to buy a house. Also, if you have bad credit, it may be impossible to get a home loan before you re establish your credit. So, this may leave you with the question, if I get an auto loan to re establish my credit, how long does it take?
To re-establish credit many things should happen. Also, the fact of whether or not your credit is re-established is in the eye of the beholder. One thing is usually a give though, to re establish you need to have some sort of credit to build on. There are three main credit Agencies, TansUnion, Equifax, and Experian. These credit agencies show the credit history which is reported to them. Once they have a pattern of information reported to them they with reflect this on a person’s credit profile, otherwise know a credit bureau or credit file. The credit agencies will tally up all the information that is reported to them and determine your credit risk thus assigning you a credit score. To simplify the matter, the higher the score the lower the risk for a potential creditor will be faced with if they offer you credit.
Creditor like to see a high credit score and several other positive indicators that you will be a low credit risk in order to approve a loan. If you have bad credit, they may want to see a recent trend of responsible repayment history. The credit agencies tend to look at an auto loan as a big part of your credit score and usually give a lot of importance to loans that have been open for more than a year. If you can get an auto loan and keep it in good standing for more than a year and keep everything else paid on time you will be well on your way to re establishing your credit.
