The credit mix is the variety of accounts in your credit report, including installment accounts and revolving accounts. Other examples of these loans include a mortgage and some personal loans.īecause payment history has the biggest influence on credit scores, installment loans are usually a good way to raise a credit score - if you make payments on time.Īnother way your credit score could increase is if the car loan helps with your credit mix. But don't panic - your car loan may help you raise your credit score.Īn auto loan is commonly reported as an installment account - you're borrowing a set amount at one time and making set repayments in installments over a fixed period. How will a car loan impact my credit score?Īfter you take out a car loan, the quickest change you might see in your credit score is a drop. A soft inquiry occurs, for example, when you check your own credit report, but it doesn't affect your credit score. These inquiries can affect your credit score. A hard inquiry appears when you allow someone to look at your credit history, not just your credit score, to process a loan or credit application, like a car loan. Inquiries into a person's credit can also affect their credit score. You can get your credit report at See note1 While that credit report won't include your credit score, some credit card companies offer a free version of your credit score, but keep in mind there are numerous different credit scores, so the one you see may not be the same one used for underwriting new credit applications. The federal government requires the three major credit reporting bureaus - Equifax®, Experian® and TransUnion® - to provide a free credit report to consumers once a year. VantageScore® is another credit scoring system.

That's why paying bills and loan payments on time can be a good way to increase your credit score. Payment history is the most important influence in your credit score, accounting for 35% of the entire score. The credit score is a mix of five key factors: payment history, amounts owed, new credit, mix of credit and length of credit history. The FICO® credit score - the most widely used model - calculates scores on a scale from 300 to 850 points, although some older versions have a different range. When applying for a car loan, it's important to understand the basic anatomy of a credit score, where the credit score fits into the loan process and what different inquiries can be made into your credit.įirst, let's look at what makes up a credit score. Here are a few things to keep in mind: Applying for a car loan: Know your score Miss a payment and your credit score will take a hit, but consistently making payments on time will help build your credit history. There are a variety of factors that can affect how a car loan will impact your credit. But they don't often think about how that loan will affect their credit score after they buy the car. Most people know they'll need a good credit score to get a loan to buy a car.

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