How my car loan affects my credit?

Question

I have a car loan through my credit union for the amount of $13,500 for 36 months. I had a co-signer. Our combined FICO scores got us an interest rate of 5.15%. My FICO score was about 671 at the time and his was almost perfect. My credit was good, but just insufficient, being that I was barely turning 21 at the time of the loan. It has been a little over a year now. I have made every payment on time. How will this affect my credit? I know by making on time payments it helps your credit, but when does this benefit kick in? Will my credit score improve gradually every month I make a payment? Or does my credit not improve until my entire loan is repayed? Any idea how much this will improve my FICO score?

Answer 1

Your credit score should be improving as often as they are reporting your payments to the credit bureaus. You won't benefit from a higher credit score on your current loan but you will on future loans. Having a high credit score is great for several reasons other than being able to get a loan, getting a large credit line, and lower interest rates... your ability to get a better job improves also since your credit score indirectly proves your ability to handle responsibility. It could also get you lower rates on your insurances.

Answer 2

A 671 score is very good for a 21 yr old, you should be proud of yourself. This car loan, as long as it's paid well, is a major boost for your credt. But before you'll reap the benefits of a well paid loan, you'll also be showing more money owed, which is a decrease in your credit, depending on your debt to income ratio. As this loan goes on, and the money amount owed gets lower, your credit score will begin to rise, assuming you pay everything on time. Keep up the good work, showing a good track record for several years will be a major boost to your credit score. You could be at 750 by the time you are 23.

Answer 3

Most financial institutions report monthly, so each month a report was made as to whether the payment was made, and if so, on time. Your credit score should definitely reflect this already.