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?

Answer
Applying for a car loan can temporarily drop your credit score by about 20-30 points.
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.
Eric Schad
Answered on Nov 17, 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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