Can Financing a Car Build Credit?

Buying a car is one of the biggest purchases many people make. Does financing a car build credit? The short answer: Yes — it can, if managed responsibly. A car loan can be a powerful tool for boosting your credit score. The average used car or truck now costs $18,577. For many Americans buying a vehicle, auto loans are a necessity. An auto loan can help your credit if you make your monthly payments on time and the lender reports them to major credit bureaus, including Experian, Equifax and TransUnion. Here’s how it benefits your credit profile: Opening and managing a loan increases the number of active accounts, which can improve your score over time. On-time payments help build a strong payment history. A car loan adds to your credit mix, showing lenders you can handle different types of credit. If you do finance, make sure to read the auto loan contract thoroughly and request in writing their promise to report your payments to the credit bureaus.