Rebuilding your credit takes time, but a car loan is one of the fastest ways to improve your credit score. Whether you have bad credit, no credit, or are recovering from past financial challenges, making on-time car payments can help you restore your financial standing.
This guide explains how long it takes to rebuild credit with a car loan, what factors influence your credit score, and how to speed up the process.
How a Car Loan Affects Your Credit Score
Your credit score is determined by several factors, and a car loan helps improve it in multiple ways:
- Payment history (35%) – Making on-time payments consistently builds positive credit history.
- Credit mix (10%) – Having a car loan adds installment credit, which diversifies your credit profile.
- Credit history length (15%) – Keeping an auto loan in good standing for at least 12 months strengthens your score.
Timeline for Credit Improvement with a Car Loan
Month 1-3: Initial Impact on Credit Score
- When you take out a car loan, your credit score may drop slightly due to the new debt and hard inquiry from the lender.
- After your first few on-time payments, your credit score will start to stabilize.
Month 4-6: Early Credit Growth
- By this point, consistent on-time payments begin to have a positive impact on your credit.
- If you previously had no credit history, you may see a noticeable improvement.
- If you had late payments or defaults in the past, recovery may take longer.
Month 6-12: Significant Improvement
- A full year of on-time payments shows lenders that you are financially responsible.
- Your score may increase by 50-100 points, depending on your past credit history.
- If your lender reports payments to credit bureaus, your progress will be reflected in your credit report.
12-24 Months: Strong Credit Rebuilding
- By keeping up with payments for one to two years, your credit can improve substantially.
- You may qualify for lower interest rates on future loans.
- If you pay off your loan in full, it further boosts your credit profile.
How to Rebuild Credit Faster with a Car Loan
- Make Every Payment on Time – Late payments hurt your credit score more than anything else.
- Choose a Loan That Reports to Credit Bureaus – Some Buy Here Pay Here dealerships don’t report payments, so confirm before signing.
- Keep Loan Terms Short – A 24-36 month loan builds credit faster than a long-term loan.
- Avoid Taking on More Debt – Keep credit card balances low while repaying your auto loan.
- Monitor Your Credit Report – Check your progress using free credit tracking tools from Experian, Equifax, or TransUnion.
Can Buy Here Pay Here Help You Rebuild Credit?
Some Buy Here Pay Here (BHPH) dealerships report payments to credit bureaus, but not all do. If you’re financing through BHPH and want to rebuild credit, ask:
- Do you report payments to credit bureaus?
- Will on-time payments improve my credit score?
- Can I get proof of payment history when my loan is complete?
If building credit is your goal, only work with dealerships that report payments to ensure your progress is documented.
Final Thoughts
Rebuilding credit with a car loan typically takes 6-12 months for early improvement and 1-2 years for significant growth. The key is consistent, on-time payments and avoiding additional financial mistakes.
If you’re looking for a car loan that can help rebuild your credit, check out our Buy Here Pay Here dealership options today.
