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How much does a car loan initially drop your credit score?

I want to purchase a vehicle with a car loan, but my friend told me that it could potentially drop my credit score. (I'm planning on buying a boat a few months after the car, so I don’t want my score to drop.) How much will the car loan drop my credit score?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
When you take out a
car loan
, your score will temporarily drop somewhere in the range of 20 to 30 points. This is because when you take out a car loan, you:
  • Lower the average age of your credit
  • Increase your credit utilization ratio
  • Consent to hard inquiries on your credit report
Make sure to minimize the damage by doing all of your car loan shopping within a 14-day period. Within this time frame, you can contact as many lenders as you want, but only one hard inquiry of your credit will be recorded.
Since you also want to buy a boat, the order in which you apply for the loans doesn’t matter. The 20-30 point drop will happen with either loan.
Your credit score should bounce back after some time has passed. From there, make sure your credit builds over time by making all of your payments on time. To put money toward your loan, make sure you’re not overspending on other expenses, like
car insurance
.
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