Your credit score is perhaps the single most important number in your financial life—one that can determine everything from your ability to purchase a home or car to your ability to get hired for a job. Unfortunately when you have bad credit, these things are harder to do, and they may come with stipulations like higher interest rates, which means higher payments. Some people believe that having a bad credit score now means you’re doomed to have it forever, but there are ways you can improve your score without suffering the negative consequences of not being able to borrow money if you need it.
Understanding Credit Scores
Your credit score is a number between 300 and 850 that tells creditors about whether or not they should take on the risk of lending money to you. Generally credit scores are divided into:
- Bad = under 600
- Poor/Fair = 600-679
- Good = 680-719
- Excellent = 720 and up
Keep in mind that each creditor evaluates credit scores a little differently, so those are just guidelines, and could be different depending on your lender. The bad news is that a poor credit score today won’t necessarily get better over time unless you actively work to improve it.
Improving Your Credit Score
The best ways to improve your credit score include:
- Paying all of your bills on time
- Making at least the minimum payment every month
- Paying off debts and revolving credit
- Reducing the number of times creditors check your credit report/score (which happens when you get a new credit card, purchase a car, get a loan, etc.)
Using Car Title Loans to Improve Credit
With a bad credit score it can be difficult to get approved for things like credit cards or unsecured loans, which makes it harder to do the things necessary to improve your score. Fortunately it’s not the only option available to you. Car title loans are secured loans that offer the opportunity to improve your credit score.
These loans use your vehicle as collateral, you get to keep the vehicle and use it while you repay the loan, and it remains in your home. As you making on-time payments, it can boost your credit score. Be sure to work with a reputable lender that will structure your loan with affordable monthly payments, and that your loan can be repaid in a reasonable amount of time.
Other Options for Credit Score Improvement
Not all car title loans are reported to credit bureaus (the agencies that keep track of your credit and calculate a credit score), in which case they would not help improve your credit score on their own. However, if you use the money from your car title loan to repay other debts and loans, this can free up some of your available credit and improve your credit score from the lender’s perspective. Ask about whether the loan will be reported to credit bureaus before you decide if you want the loan.
Remember that it can take quite a bit of time to fix your credit, but the best way to do it is to show lenders that you are trustworthy and can make payments on time. A car title loan is one option available to you if you have trouble getting other loans and want to improve your credit.