Improving Your Credit with Ontario’s Autohouse Kingston

Whether you just missed a few payments, or you’ve run into serious financial trouble due to health or employment issues, the team at Ontario’s Autohouse Kingston understands that credit trouble can happen to the best of us. Rather than dwell on the cause, we’re here to find you a solution—which is often a vehicle loan! Not only can it help rebuild your credit, a well-structured and budgeted car loan can help you improve your credit habits as well. That’s why Autohouse Kingston wants to help you find a new vehicle that fits your budget, while improving your credit. Read on to learn more about how we can help you rebuild your credit, or simply jump to our online credit application page and begin the process today!

What impacts your credit score?

One of the most important steps in rebuilding your credit is knowing how credit works! This includes knowing about the different factors that affect your credit score. You can find more information by clicking the link, but the following factors are essentially what determines your credit score:

Payment History

Making up about 35% of your credit score, your payment history looks at both if and when you’ve made the necessary payments to your lenders.

Debt load/Credit utilization rate 

About 30% of your credit score is related to your debt load. Debt load includes factors like the amount of debt you currently have compared to your income, as well as how much credit you utilize compared to the credit allotted to you.

Credit history

Approximately 15% of your credit score is based upon how long you’ve had a credit account open (note, if you close a credit account completely it will eventually disappear from your credit history entirely, shortening your overall history).

Credit mix

Approximately 10% of your credit score is related to the different types of credit you have. This can be further broken down into revolving credit or installment credit, which can include auto loans, student loans, a mortgage, or credit cards.

Credit checks/inquiries

Another 10% (approx.) of your credit score relates to credit checks or inquiries. There are two different types of inquiries, soft and hard, with the former having no impact on your score and the latter having a negligible impact. 

Ways to improve your credit

The reality is, there’s no magical way to improve your credit instantly. However, there are a number of ways that you can rebuild your credit over time, and this often starts with a vehicle loan. 

While borrowing more money may seem counterintuitive, the reality is you will need to prove to lenders that they can trust you’ll repay what you’ve borrowed—and that can only happen in practice, not theory. The following steps are a great way to begin rebuilding that trust and, in turn, your credit.

  1. Make payments on time
  2. Take on manageable debt
  3. Pay off your debts in full
  4. Diversify your credit

Make payments on time

This one seems like the most obvious, but it can also be the most difficult. The only way you can rebuild your credit is by making the necessary payment by the necessary date; and, depending on how low your credit score has fallen, this process can take anywhere from months to years.

Take on manageable debt

If you’ve already fallen into financial trouble, taking on a big loan won’t help you rebuild your credit faster. In fact, it can be detrimental, as the higher payments make it easier to fall behind. Rather, take out a smaller loan if possible, to ensure that you can make the monthly payments on time—see above.

Pay off your debts in full

While it might be easier to kick the can down the road by moving your debt around, paying off one card with another, it can negate any progress you make by following the steps above. Sure, it’s easier said than done, but by slowly paying off your debts is a surefire way to create a bit more leeway with your finances and help you improve your credit.

Diversify your credit

As mentioned above in the factors affecting your credit, having a good mix of credit can help improve your credit score. This means having both revolving credit (like a personal line of credit or credit card) as well as installment credit (a mortgage or auto loan). Of course, it’s especially important to keep point number two in mind here, and take on manageable debt, otherwise you run the risk of once again ruining any goodwill created by missing payments.

At Autohouse Kingston we can’t change the past, but we can help provide you a solution for the future. If your credit could use a shot in the arm, start by filling out our secure online credit application form. From there we can help you find a vehicle that fits into your budget, as well as working on a strategy to help you ensure you’re making timely payments and improving your credit score!