Can You Improve Your Credit Score While on Car Finance?

If you’re currently paying off car finance, you might be wondering whether it’s possible to boost your credit score at the same time. The good news? Yes, it absolutely is.

At carloans 365, we’re committed to helping drivers not only secure car finance but also improve their overall financial wellbeing. In this blog, we’ll explore how car finance impacts your credit score and what steps you can take to improve it during your agreement.

How Car Finance Affects Your Credit Score

Car finance can influence your credit score in both positive and negative ways, depending on how it’s managed. Here’s how:

• Initial credit check: When you apply for car finance, lenders will run a hard credit search, which may cause a temporary dip in your credit score.
• New credit account: Opening a finance agreement adds to your credit profile, increasing your overall available credit, which can be beneficial.
• Payment history: Your monthly repayments are reported to credit reference agencies. Consistently paying on time has a positive effect on your score.
• Credit utilisation: Car finance is usually classed as a fixed-term loan rather than revolving credit, so it doesn’t affect your utilisation rate in the same way as a credit card.

5 Ways to Improve Your Credit Score While on Car Finance

Here are some practical steps you can take to strengthen your credit score during your car finance term:

1. Make All Payments on Time

The single most important factor in your credit score is your payment history. Even one missed payment can significantly hurt your score. Set up a direct debit to make sure you never miss a payment.

2. Keep Your Other Credit Accounts in Good Standing

While managing your car finance, don’t neglect other forms of credit like credit cards, store accounts, or personal loans. Ensure you’re meeting all repayment deadlines across the board.

3. Avoid Taking on Too Much Additional Debt

Each new application for credit creates a hard search on your report. Multiple new accounts in a short time can signal financial stress to lenders and negatively impact your score.

4. Register on the Electoral Roll

Being registered at your current address helps lenders verify your identity and improves your creditworthiness. It’s a simple step that can have a noticeable impact.

5. Check Your Credit Report Regularly

Mistakes on your credit file can hold you back without you realising. Use a free service like Credit Karma or ClearScore to keep an eye on your report and challenge any inaccuracies.

Can Paying Off Car Finance Early Help Your Score?

Paying off your car finance early might seem like a great idea, and in some cases, it can reduce your overall interest. However, from a credit score perspective, it’s not always necessary.

Lenders like to see a track record of successful, long-term repayments. So, finishing a term as agreed and making every payment on time can be just as beneficial — if not more — than clearing it off early.

Final Thoughts

Improving your credit score while on car finance is not only possible — it’s a smart move. By keeping up with repayments and managing your other financial obligations, you can lay the groundwork for better credit options in the future.

If you’re looking for a finance agreement that supports your financial goals, carloans 365 is here to help. Whether you have excellent credit or you’re working to improve it, we’ll work with you to find the right car finance solution.

Need help understanding your finance options or credit score impact?
Get in touch with carloans 365 today — we’re ready to support you every step of the way.