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Paying Auto Loans On Time Will Save Your Credit Score

By Sally Maison
Published: Monday, June 28th, 2010

81690626Experian conducted a survey amongst auto loan consumers and their payment habits. The study found out that approximately 12% of the population has at least one delayed payment for an auto loan. With over 28% of the population availing of auto loans, we can deduce that more than half of those with vehicles on loan fail to pay their dues on time. And while it will not readily lead to bankruptcy or anything as serious, late payments will still take toll in a borrower’s credit report.

The National Score Index of Experian shows that auto loan availers who do not have delinquent payments have a credit score that is about 98 points higher than those with delinquent payments. This is true even for one day overdue payments. And the best way to take charge of the situation and prevent further damage in one’s credit standing is to pay the debt immediately. Allowing the loan payment to reach 90 days of delay will further lower borrowers’ score to sub-prime lending. And if they are already transacting in sub-prime, peopl might just find themselves knocking on the doors of loan sharks and other lenders that charge sky-high interests.

People in New Hampshire have the highest average credit score so far at 728. From this credit score, delaying payments for an auto loan will automatically lower consumer’s score by almost a hundred points, leaving them at 628. Succeeding months of not being able to pay will again subtract more points from your current score. Consumers who have missed a payment must not let that debt reach 90 days of delinquency unless there is a very special reason to do so.

Consumers are quite concerned about their credit score because this defines what terms of payment consumers will have when they apply for loans and insurance. As motorists, people are not only concerned about the vehicle they are driving but also their own safety and the insurance of the vehicle. With lower credit scores, the terms of your car insurance will also change. There is a higher premium for people who have lower scores because, like any other loans, the less of a threat you are to an insurance company then the lower your premiums will be.

Overall, the simple observance of paying your auto loan dues on time will tremendously help other aspects of your financial life. So take charge and make sure all loan payments are made on time.

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