Is Getting a Car Loan Good or Bad for My Credit Score
I was wondering if getting a car loan was good or bad for my credit score. I have a little above the national average credit score. I have a car lease and need to finance it. Will this lower my credit score?Answer:
Hi Jen, If I am understanding correctly it sounds like you are looking to purchase your currently leased vehicle.
If this is the case and assuming you leased your vehicle through one of the standard lenders that offer leases, then your lease payments are already being reported monthly to the credit bureaus.
If that's the case, then purchasing your leased car shouldn't make much of a difference to your credit score.
You can get a copy of your credit report and Get your Credit Score at CreditReport.com
to verify whether it currently is or isn't reporting to be sure though. It should be however.
Sometimes when someone purchases a vehicle, shortly after they will see a drop in their credit score, simply because it is a new account and the credit bureaus haven't determined how you will pay on it yet.
In addition, your balance is right at the original loan amount, but I'm not quite what impact that has with installment loans (a car loan is an installment loan). I know it has an impact on revolving credit like credit cards.
Usually though this will correct itself after a few timely payments have been made and your score should recover from what is typically a minor drop.
A lot of this will depend on what your credit depth is as well. If someone with 2 lines of credit buys a car their score may be affected greater than someone with a strong, well paid credit history and 15 lines of credit (lines are simply different accounts).
This is because the person with 15 lines of credit has proven themselves to be solid (credit wise) and their is no reason for the credit bureaus to think anything would change with this new account.
All in all, a well paid car loan is good for your credit score and credit file. It builds depth (history) and makes it much easier to get credit down the road.
Hope this helps,