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For many car buyers, the handshake to close the sale is just the first part of the purchase; then comes the financing. According to the Federal Reserve Bank of New York, a record 107 million Americans have auto loan debt.
Managing your auto loan responsibly can help you take the wheel of your new car and your credit rating. By making consistent on-time loan payments, you can boost your credit score and increase your eligibility for attractive interest rates down the road. Here’s how building credit with an auto loan works:
Your credit score is a three-digit number—ranging from 300 to 850 on the widely used FICO scale—that provides a snapshot of your “credit worthiness.” It is used by lenders to decide if, and at what interest rate, they’ll give you a loan. The higher your number, the better.
There are five factors that make up your score.
FICO gives precedence to installment loans over revolving credit, so it’s doubly important to consistently pay your auto loan on time. By doing so, you’ll establish the dependable track record that lenders look for. As your score increases, you’ll be more likely to qualify for better interest rates on not only auto loans but mortgages and personal loans as well.
Before you sign on the dotted line, make sure the terms—amount, due date, etc.—are ones you’re comfortable with and can meet throughout the life of the loan. To better manage your loan on your path to building credit, consider setting automatic payments to be deducted from your checking account, or set payment reminders so the due date doesn’t pass you by. Such steps can help you stay on a timely track and keep your credit score on its upward climb.
Banking Products are offered by Grasshopper Bank, N.A. Member FDIC Equal Credit Opportunity Lender. Member FDIC logo AAA-Member Verification & Product Eligibility By applying for a AAA Banking deposit account, you acknowledge and agree that if you select a AAA-member product, your AAA membership status with Auto Club Group (ACG) will be validated at the time of account opening and periodically thereafter. If your AAA membership cannot be validated or your membership status changes, your account may be moved to a non-member product with different terms, including but not limited to a lower Annual Percentage Yield (APY) and the removal of other AAA member-only benefits. If this occurs, you will receive a notification regarding the change in the product and applicable terms. If you believe your AAA Membership status was incorrectly validated or that you have been placed in the incorrect product, please contact us to review and correct your status. AAA Cashback Visa Signature® Card is issued by U.S. Bank NA dba ACG Card Services, pursuant to a license from Visa USA Inc. Equal Credit Opportunity Lender Will need L&C final approval.
