Do car payments build credit?

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To a large degree, your credit score reflects how well you repay your debt, so timely payments on a car loan can be an effective way to build your score.*

Other things affect your credit standing, too, such as how long you’ve been using credit products, but paying off an auto loan over a period of years demonstrates to a credit reporting agency that you’re a good, or better, lending risk.

That has significant potential benefits for the future because next time you need to borrow, whether for a car loan, mortgage or credit card, you’ll likely have an increased chance of approval and a more favorable rate.

If your credit is poor,† the door to a car loan, and rebuilding credit, is often still open. Full-spectrum lenders such as RoadLoans accept applications from consumers with a broad range of credit profiles. First-time buyers with no credit history, people who have been through repossession or have a discharged bankruptcy on file, for example, can all apply.

We have years of experience working with customers in these and other situations and do our best to help them get on the road and move forward. As an online platform, our application takes just a few minutes to complete and we provide instant decisions.

If approved, through RoadLoans or another lender, there are a number of steps you can take to help stay current on your account:

  • Set up payment alerts
  • Set up automatic payments
  • Move the due date to a more convenient time


Will paying off my auto loan early damage my credit?

Paying back your car loan early, so long as you have a simple interest loan, is a useful tactic for saving money on interest charges. Customers might use a number of approaches such as a lump sum payment, multiple extra payments or adding to their monthly payment amount.

Whichever way it’s achieved, keep in mind that paying off the loan early may also result in a drop in your credit score. Yes, you’ve fulfilled your end of the bargain by repaying the debt in full, but, if you don’t have other installment loans, you’ll have a gap in your credit mix.

No one wants an auto loan to go on forever, of course, and it makes sense to weigh the potential benefits of interest savings and no more car payments versus a ding to your credit score. When you’re considering an early pay off, it’s also worth checking whether your lender will charge a prepayment penalty. Loans originated by RoadLoans carry no such penalties so you’re free to pay down the balance early if you wish.


Move forward with RoadLoans

Getting approved for an auto loan and making regular payments could be an opportunity to rebuild poor credit or drive a better score higher. Complete our short application and get your financing decision in seconds. If approved, we provide multiple offers so you can select the best option for your needs.

Apply for a car loan online.


* These statements are informational suggestions only and should not be construed as legal, accounting or professional advice, nor are they intended as a substitute for legal or professional guidance.

RoadLoans is not a credit counseling service and makes no representations about the responsible use of or restoration of consumer credit.

† “Bad” or “poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press),,, Investopedia, and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by and Santander Consumer USA.


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