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How much does applying for a car loan affect your credit report?
I want to shop around for my car loan, but I'm worried that applying at too many places might hurt my credit. Is this true? How much will my score drop?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
First, lenders must perform a hard inquiry on your credit. Each hard inquiry may drop the score by about 5-10 points. However, if you apply with all your potential lenders within a 14-day window, only one hard inquiry will be counted toward your credit report.
Additionally, when you sign on to a loan, the average age of your credit decreases, which can cause your score to drop.
Don’t fret, though. If you continue to make on-time payments on your car loan, you should find that your credit score will consistently increase. Plus, in 12-24 months, the hard inquiries should fall off your credit report, giving you an additional five to 10 points back instantly.
Overall, be careful not to sign onto a loan too big for your budget. Take into account that you’ll have to pay for fuel, maintenance, and
car insurance
beyond your car notes.Want to get the best car insurance rate on your new vehicle? Check out the
Jerry
app. Sign up and compare dozens of rates from reputable carriers including Nationwide, Allstate, Liberty Mutual, and more. View full answer
- Gregory R.
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