How fast does a car loan raise my credit score?

I'm looking to boost my credit score with a car loan. How fast will my credit score go up after signing the papers?

Answer
In theory, a car loan will build your credit score, but it will take time and patience. Initially, a car loan actually will lower your credit score. When you take out a car loan, most lenders do a hard inquiry on your credit report, which will cause a drop of five to 10 points. It will also lower the average age of your credit and create a new credit account.
In total, this may drop your credit score by 20 to 30 points initially. However, continuous on-time payments will cause your credit score to rise. After about a year or two, you should notice your score going up.
If you decide to buy a new car, don’t forget to budget for car insurance. The loan will require full coverage car insurance, so shopping around can save you the most money. Use the Jerry app to compare quotes from dozens of insurance companies to get the best rate possible.
Eric Schad
Answered on Nov 16, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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