Repairing your credit doesn't have to be difficult. In fact, if you need a vehicle, you can kill two birds with one stone by getting an auto loan. If you qualify, a bad credit car loan can go a long way toward helping you improve your credit score.

What Goes into Your Credit Score

Repairing Your Credit with an Auto LoanWhen you have bad credit, it can be difficult to get an auto loan. Typically, this is because lenders base approvals on your credit – both your credit score and credit reports.

Your credit score is made up of five factors based on information from your credit reports. These factors let lenders know how responsible you've been with credit. They are:

  1. Payment history
  2. Amounts owed
  3. Length of credit history
  4. New credit
  5. Credit mix

Each of these areas has a weight and combines to paint a full picture of your credit profile, which your credit score is based on. Most lenders use the FICO credit scoring model when they're considering your creditworthiness, but there are other credit scoring models available as well.

How Car Loans Impact Credit

Every car loan situation is unique to the person applying, and lenders look at many factors to determine whether or not to offer you a loan. The same factors that lenders look at to determine your approval can be impacted by successfully completing an auto loan.

One of the biggest factors that make up your credit score is your payment history. The longer you make payments on credit accounts, the more chances you have to build a positive payment history. This factor makes up 35% of your credit score. Because a car loan is typically a long-term installment loan, you have a long time to build on this by making on-time payments over the course of your loan.

Since auto loans are installment loans, this also adds to your credit mix, which makes up 10% of your credit score. Having a good credit mix means having a balance of installment credit like car loans and mortgages, as well as revolving credit like credit cards.

The final factor that can be impacted by an auto loan is new credit. It's not a good idea to continuously apply for new credit just because you want to. This can be a red flag for lenders. However, applying for credit when necessary, and properly spacing out and paying your accounts can be a positive boost to your credit profile. New credit makes up 10% of your credit score.

Just as all of these factors can be improved with a car loan, they can also be negatively impacted if you're not responsible. Making consistent late payments, skipping payments, and defaulting on your loan can lead to a lower credit score. These negative marks will show up on your credit reports the next time a lender looks at them, making it even more difficult to get a loan if you need a vehicle.

Getting a Car Loan with Bad Credit

Just because you have bad credit doesn't automatically count you out for an auto loan – as long as you're working with the right type of lenders. This usually means getting a loan from a subprime lender through a special finance dealership.

Not all lenders can work with bad credit borrowers, and not all dealers that are signed up with these lenders are easy to pick out of a crowd. Here at Auto Credit Express, we can help with that, though.

We work with a coast-to-coast network of special finance dealerships that have lenders prepared to work with bad credit. We've been matching consumers with dealers for over 20 years, and we want to help you, too.

You can get the process of repairing your credit with a car loan started right now. Just fill out our zero-obligation auto loan request form. The process is fast and free – click here to get started!