How a Warranty Can Protect Your Credit Score

Coins lay around a piggy bank

Written by Centennial Credit

Dec 9, 2020

You’re probably wondering how a car warranty can protect your credit score. It may not be obvious, but it is true and we’re going to show you how.

A warranty will protect your monthly budget from being disrupted by an unexpected, costly repair. This means that your income and cash is reserved for the other expenses in your life. 

A repair could happen at anytime and could cost any amount of money to fix.

For example, let’s say you suddenly have a $2,000 car repair come out of nowhere. Do you have that kind of disposable cash laying around to put towards it? You may or may not, but the point is you may never have to be in that situation.

A warranty can protect your credit score by covering the cost of these unexpected repairs so that you don’t have to reallocate cash from paying another bill to repair your car.

For example, let’s say because of the $2,000 repair that came out of nowhere that you have to decide between making a credit card payment or fixing your car. You simply don’t have enough cash to do both at once. If you need your car to get to work to earn income (which most people do), then you will probably choose the car repair over the credit card payment. 

Now you will have a slow credit card payment recorded on your credit score that may make it more difficult to obtain credit in the future should you need it.

With a warranty you never have to be put in the situation of choosing to fix your car or pay another bill.

Alternatively, let’s say that you’ve been saving up for a family vacation. You have $3,000 set aside over the last 6 months. 

Suddenly you’re hit with that nasty unexpected $2,000 car repair. You need your car for work so you must fix it. Now you have to explain to your family that you can’t go on the vacation you’ve been planning because you had to get your car repaired instead. Not fun.

Again, with a warranty you never have to be in the situation of choosing what to do. If a repair pops up, no matter when, you can get it fixed with no impact on your monthly cash flow or budget and that is how a warranty can protect your credit score.

In the next article in our warranty series we discuss how a warranty can actually keep your car payment down, rather than increase it.

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