How much does a car loan affect your credit score?

I'm thinking about opening a car loan, but my credit isn't great. Will a new loan lower my credit?

Answer
Car loans will definitely have an impact on your credit score, but the extent to which you’ll be affected will largely depend on your existing credit history. If you’re worried about your score, it’s worth checking your current credit on a site like Credit Karma. That way, you’ll know what kind of hit to expect when you take out your loan.
Opening a new loan will cause a dip in the average age of your accounts, which will in turn lower your credit score. If you only have one or two accounts, the hit will be much more significant than if you have a long credit history with a lot of accounts.
It should be noted, too, that a loan can eventually help your credit, as long as you consistently make your payments on time, and any negative effects will disappear as you continue to pay off your loan.
If you’re shopping for a new car, you should be shopping for insurance, too. The Jerry app makes this process quick and easy by gathering quotes for you for free, so you can compare prices and coverages in minutes.
Liz Jenson
Answered on Nov 11, 2021
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