Did you know that, in Los Angeles, you can build your credit by getting an auto loan? What’s more, you can still get approved for a car loan as long as you’re using the right kind of lender even with bad credit, no credit, or bankruptcy on your credit reports.
Lenders for Bad Credit Car Loans
There are many types of auto lenders, but not all of them work with bad credit borrowers. Those that do are called subprime lenders, and they only work through special finance dealerships.
These third-party, indirect lenders can be either independent finance companies or captive lenders. The thing that makes these lenders different from traditional lenders is that they use outside factors in addition to your credit score to qualify you for a car loan.
So, if you’re a resident of the city of Los Angeles that doesn’t have great credit but has a steady job, residence stability, and proof of a working telephone (among other bad credit auto loan requirements), you may be able to get approved more easily than you think.
How a Car Loan Can Help Build Credit
If you’re able to meet all of the lender requirements and qualify for a bad credit car loan, you can begin improving your credit score in a number of ways.
An auto loan affects three of the five factors that make up your credit score: payment history, credit mix, and new credit. These factors account for 55% of your credit score, so improving these areas should help you build credit.
Because living in the City of Angels can be expensive, it’s important to maintain good credit habits. While a car loan helps build credit, you’re going to see better results if all of your credit accounts are working together.
Tips for Improving Your Credit Score in Los Angeles
In addition to getting an auto loan, there are a few simple tips you can use to start improving your credit score today:
- Pay all bills on time – Payment history accounts for 35% of your credit score, so the more bills you pay on time, the better.
- Pay off outstanding debts – Any outstanding debts can weigh down your credit score. Start small, and pay off low balances before tackling bigger debts.
- Keep your credit card balances low – Overspending is a big issue in the LA area. This isn’t surprising given the cost of living, but you could see improvement if you can manage your debt and keep your credit card usage at or below 30% of your spending limits.
- Don’t close your credit accounts – Length of credit history makes up 15% of your credit score, so you may want to think twice about axing some of your older credit accounts. Instead, pay them off, and only use them occasionally to keep the accounts active.
- Clean up your credit reports – Getting incorrect items removed from your credit reports can help improve your credit score. To do this, it’s important that you stay on top of your reports throughout the year, and dispute any errors to the credit bureaus. You’re entitled to a free copy of your credit reports from each of the three national credit bureaus every 12 months, which you can request by visiting www.annualcreditreport.com.
Ready to Find Your Next Auto Loan?
There’s no shortage of places to go looking for a car loan in Los Angeles, but do you know which dealerships work with subprime lenders? Auto Credit Express does.
We work with an extensive network of dealers all across LA, California, and the rest of the country, and we want to help you get connected to a dealership near you. To get the process started, fill out our easy auto loan request form today.
What are you waiting for? Better credit and the car loan you need could be just around the corner!
