How Fast Will A Car Loan Raise My Credit Score?

If you are looking to raise your credit score fast, it will take time and you should look at a mix of tactics to see significant improvement. 

So, on top of “how fast will a car loan raise my credit score” you should look at all the factors that raise a credit score. 

For instance, a car loan contributes to credit utilization and a mix of credit, which is all about diversity. 

See how to boost your credit score by 200 points or, even, 10 points to get an idea of the mix of tactics you can implement to getter a better credit score.

Overall, adding an auto loan to your credit report will play a part in each of the 5 factors of your FICO score. 

The Five Factors To A FICO Score:
  1. Payment History 
  2. Credit Util 
  3. Length Of Credit History 
  4. New Credit 
  5. Credit Mix
FAQ: Does a car loan apply to credit utilization? Yes it does 

Want Help Removing Items Off Your Credit Report?

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How Fast Will A Car Loan Raise My Credit Score 

Paying a car loan can increase your credit score. Whoever, it won’t be that fast- Give a few months. 

To make the best of your loan, make sure you are paying on time if you want your car payments to improve your credit faster. 

Does a car loan build credit?

Yes, simply by getting your car loan, you add diversity (Credit Mix) to your credit report contributes to 10% of your score.  

For the quickest results :
  • May Payments on time (All)
  • Remove Incorrect or negative info from your report (or hire someone to)
  • Keep Old Credit Accounts

Will my credit score drop if I buy a new car

If your credit score dropped after getting an auto loan, don’t fret. It is a temporary hiccup you’ll experience before seeing improvement. 

Nathan Grant, Senior Credit Industry Analyst from Credit Card Insider, Says:

“If you apply for a vehicle loan and haven’t applied for any other credit recently, you can expect that the hard credit inquiry will trigger a reduction in your credit scores of less than five points, if anything at all.

Having a good mix of credit is a factor that goes into your credit scores as well. 

Since car loans are installment debt rather than revolving debt like credit cards, this could positively impact your credit, so just be sure to always make on-time payments once your vehicle loan is approved.”

Depending on your current situation it may drop a few points initially because the lender will make a hard pull (hard inquiry) on your account to simply check your history.

If there are too many hard inquiries being made around the same time, you will see a drop (or worse, get denied your loan)

But, once approved, and paying consistently and on time, you can see an improvement. Payment history contributes to 35% of your FICO score. 

Of Course, you will have to stay current with all bills. You won’t see your credit score dropped 100 points after buying a car (if you do, its not the car loan itself that caused the drop). 


Does paying extra on a car loan help credit?

Some cases paying off your car can have a negative effect on your credit score. Simply because having open credit helps your history. 

Paying extra will help your credit utilization and history but it will reduce your credit history length. 

The longer you have the account open (and current) the better it is for your score because an open account is better for you to credit than a closed account.

When Should You Pay Off Your Car Loan Faster?

  1. If You Have A High-Interest Car Loan
  2. When You Have To Fix Your DTI Ratio
  3. If You Have A Bunch Of Additional Open Accounts

How much will a car loan drop my credit score?

It will drop just a few points because of the hard inquiry the lenders perform. 

If you have a lot of hard inquires within 30 days you are given a grace period. The VantageScore has a 14 day grace period- just be mindful of this while shopping around.


How many points will a car loan raise my credit

We cant tell you how much your score will rise. It’s all situational.

People with a high credit score of like a 750, you may not see a huge boost. But someone with a 500, will definitely notice a jump.

Remember, your car loan will not be the only factor. Making on-time payments on your car but failing to pay your mortgage, you will not see a boost. 

Also, if you already have negative items lingering it will be hurtful to your credit. 

You can get companies like Ovation Credit Services By Lending Tree or Lexington Law Credit Repair to help with that. Here are three 

Get Consultation From These Credit Repair Companies 


Want Help Removing Items Off Your Credit Report?

Top Credit Repair Services

Wrapping Up

Does a car loan build credit? Yes, a car loan does build credit but you have to keep up with all of your other bills/payments. If you have a thin credit profile then adding the car loan “beef up” your history/score. 

Over time your car loan will improve your credit score. But, there is no firm number or exact timeframe to see improvement because everyone’s history is different. 

Still, assuming everything is current and in good standing, the car loan will only drop a few points for a short period of time.  

James Willaims
 

Hey There, James here. I am the co-founder and editor of this site. I have over 10 years experience in business and 5 in the credit repair world