If you already have a credit score in the 800s and you make payments on a car loan, it won’t go much higher because the highest you can go is 850.
But if you have a low credit score, like in the 400s, making regular and on time payments can, over the long term, raise your credit score quite a bit.
Should I get a car loan to build credit?
Buying a car can help you build a positive credit history if you pay the debt on time and as agreed. Failing to pay on time will hurt your credit. When you apply for a car loan, your application will probably be sent to multiple lenders. A new inquiry will be added each time a lender reviews your credit report.
Will getting a car loan lower my credit score?
Your credit score typically drops after taking out a car loan because of the impact it has on three areas that affect your rating. However, an auto loan can help you build credit and overcome the initial negative impact when paid back responsibly.
How will buying a car affect my credit score?
An important part of your credit score is your credit utilization, or the amount of available credit you’re using. Having an installment loan — your new vehicle purchase — on your credit score can also help improve your credit mix and may positively affect your score over time as well.
Photo in the article by “Mount Pleasant Granary”