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

I'm in the market for a car, but I can’t decide whether to pay cash for a used one or finance a new one. How much does your credit score typically drop when you get a car loan?

avatar
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Taking out a
car loan
 typically causes your credit score to drop 10 to 30 points. 
Here are the aspects of vehicle financing that can affect your credit score the most:
  • Hard credit check: Lenders will pull a hard inquiry on your credit report to see your credit history and assess your creditworthiness to purchase the vehicle. This typically drops your score five to 10 points.
  • Credit utilization: Accepting a car loan increases your overall credit utilization. Depending on the size of the loan, and how much available credit vs. utilized credit you already have, this could cause your credit score to drop an additional five to 10 points.
  • Length of credit history: A car loan will represent a large chunk of new credit. Depending on how long you’ve held the rest of your available credit, a large new loan can drop your credit score by at least a few points.
MORE: How to get preapproved for a car loan
Car LoanCredit ScoreCar Buying
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