Finder makes money from featured partners, but editorial opinions are our own. Advertiser Disclosure

Did you know you could use a car loan to repair bad credit?

Rebuild credit and improve your credit score with an auto loan that works for you.

There are dozens of unfortunate circumstances that could lead you to a poor credit score. However, a successfully managed auto loan may be the turning point in your credit history that shows future lenders you can handle a long-term financial responsibility.

The only way to repair your credit is to show that you’re a trustworthy borrower, and even though it may take some if you’ve had a rocky credit history in the past, it’s possible to overcome the bumps in your credit history.

How a car loan can help with credit repair

There are two types of credit, revolving and installment. Car loans are a type of installment credit, which means that when you sign a contract, you agree to make monthly payments to repay a borrowed lump sum, plus interest and fees, in a set frame of time. Revolving credit is a product like a credit card, a debt that can get rolled over each month. Having both types of credit is a good thing.

A diverse credit portfolio is what you want on your credit report to show lenders that you’re a reliable borrower for both short-term and long-term financial commitments. And because the different types of credit you have account for about 10% of your credit score, taking on an auto loan can broaden your credit history and boost your credit score.

How to get the right auto loan to rebuild your credit

Before you start making plans for your first trip, you need to know how to shop for an auto loan that’s suitable for your situation.

You need to be sure that whatever lender you decide to do business with will report your credit activity to the credit bureaus.

If a lender isn’t reporting your on-time payments to the credit reporting agencies, your credit report won’t be polished by the successful management of your auto loan — this is a must for borrowers trying to repair their credit.

  • Budget. Figure out how much you can afford so you’re not borrowing money that you realistically can’t pay back.
  • Make a down payment. Save as much as you can to use as a down payment to obtain a loan with better rates and lower monthly payments.
  • Loan fees and rates. Not only do you want a low interest rate, but you also want to avoid excessive fees.
  • Flexible payments. Look for lenders that have no prepayment penalty that’ll allow you to pay off the loan early without being penalized.
  • Car choice. Now is not the time to buy an expensive car, but rather a practical and affordable one. You’ll have a better shot being approved for a vehicle that’s preowned or just a few years old. However, if you are shopping for a new car, remember that more expensive vehicles will have larger monthly payments — so don’t overextend your budget.

What credit score do I need for an auto loan?

It depends on the lender, however, it’s key to apply for the right loans relevant to your credit score. Borrowers with scores under 600 may think that a car loan is out of the picture for them, but there are many lenders willing to work with bad-credit borrowers. Also known as subprime auto loans, these tend to come with higher rates.

Compare bad credit auto loans

1 - 3 of 3
Name Product Filter Values Minimum credit score APR Loan term Requirements
No minimum credit score
3.9% to 27.9%
1 to 6 years
18+ years old, annual income of $4,000+, no active bankruptcies
Get pre-qualified for used car financing and receive competitive, personalized rates.
Monevo Auto Loans
3.99% to 35.99%
3 months to 12 years
Credit score of 500+, legal US resident and ages 18+.
Quickly compare multiple online lenders with competitive rates depending on your credit. Car Loans
Starting at 2.15%
550+ credit score, no open bankruptcies, $24,000+ annual income, US citizen or permanent resident, 18+ years old
Get up to four offers in minutes through one simple application. Multiple financing types available including new cars, used cars and refinancing.

Compare up to 4 providers

How to manage your car loan

A car loan is a practical option that can bump up your credit score, but it’s also another financial obligation you’ll be on the hook for. Here are some tips that may let you squeeze some credit score points out of your auto loan while possibly saving some money.

Make on time payments to improve your credit score

Once you have a suitable car loan in place, stay on top of your payments. Being late or missing even one payment will be counter-productive to your goal. Make extra payments when you can, but don’t pay the car loan off too soon because it won’t do much to help repair your credit — it will only save you money on interest.

Did you know about using autopay to never miss a payment?

Most lenders allow you to use autopay to make regular monthly payments. All you have to do is set the date you want to make a payment and the funds are drawn from your bank account automatically.

This is a foolproof solution for borrowers who often miss payments due to forgetfulness.

Refinance to save money

It’s not uncommon for people who’re trying to repair their credit to get a car loan with unfavorable interest rates due to their credit standing at the time. By refinancing your car loan to one with a lower interest rate, you’ll have a lower monthly payment and pay less for the auto loan overall.

Monitor your credit score to see if it’s improved from managing your car loan, and when it has, it’s time to shop for better rates. You’ll want to refinance auto loans with interest rates over 10% as soon as you can, but it may take some time before your approved.

Keep in mind that if you’re waiting for your credit history to improve, it can take at least 9 to 12 months of steady payments to make a positive impression on your credit report and score.

What are other alternatives to repair your credit?

Besides the actions you can take to maintain and better your credit score, there are a few other ways other than a car loan to help you fix your credit history.

  • Audit your credit report for errors. Make sure to check your credit report and confirm that everything is accurate. If you notice any misinformation, get in touch with the appropriate lender or credit bureau to have it repaired or removed.
  • Debt consolidation. If you still have a number of outstanding debts, consider a debt consolidation loan. Having all of your credit bills in one account with one interest rate will make them easier to manage.

Thinking of debt settlement or bankruptcy?

Unfortunately, not everyone is in the same boat when it comes to credit repair. If you’ve exhausted all of your options and you believe your credit is irreparable, debt settlement or bankruptcy may be an alternative to consider.

Just know that once you go down either of these roads, it can be an uphill battle that could take years to get your credit score back to status quo.

Talk with a professional credit repair service

1 - 6 of 6
Name Product Monthly Fee BBB Rating Customer Support Cancel Anytime
Self Credit Builder Account
Phone, Email, Online Chat
Save money and build credit with a secured-installment loan that you can access after 12 or 24 months.
Phone, Email, Mail
Specializes in clearing your credit report of inaccurate items with all three credit bureaus.
Lexington Law Credit Repair
Phone, Email
Law firm that offers three tiers of credit repair suited to your situation.
Credit Firm Professional Credit Repair
Credit Firm Professional Credit Repair
Phone, Email, Mail
Professional credit repair service that can help you create a step by step action plan. Cancel anytime.
The Credit People
Phone, Email, Mail
Professionals work with you to clean up your credit and raise your credit scores. Cancel anytime.
Sky Blue Credit
Phone, Email, Mail
Free credit report and monitoring that comes with a 90-day money-back guarantee.

Compare up to 4 providers

Bottom line

While the task may seem overwhelming, you do have opportunities to repair your damaged credit. A good place to start is with a car loan if your current financial situation can handle the new expense without overdriving your budget.

Once you show that you’re financially responsible enough to handle long-term credit like an installment loan, other types of credit products will likely be easier for you to obtain down the road.

More guides on Finder

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

2 Responses

  1. Default Gravatar
    AchillesJune 30, 2022

    Can someone call me please

    • Avatarfinder Customer Care
      RenisheJuly 1, 2022Staff

      Hi Achilles,

      Thanks for getting in touch with Finder. I hope you are well.

      We don’t have a phone channel but you can reach us through chat and email. Are you trying to contact us or a different company?

      Hope to hear from you soon.


Go to site