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How much will a car loan boost my credit score over time?
I was thinking about getting a car loan to improve my credit mix. How much will my credit score improve if I take out a car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
While a
car loan
seems like a novel idea to build your credit score, don’t rush into it as a means to build your credit score.You should only get a car loan if you actually need the car. Taking on tons of extra debt just to boost your credit score a few points isn’t ideal.
However, if you want to improve your credit mix by getting an installment loan—such as a car loan—and you need the car, it might be a solid move. Keep in mind, your credit score will drop by about five to 10 points from a hard inquiry and then an additional 10 to 20 points from opening the loan, but this hit is only temporary.
If you continue to make on-time payments to your car loan, you should see your score steadily rise over time. If you have any extra cash, pay off other high-interest debt to further boost your credit score.
If you’re struggling to find the extra cash to pay down debt, finding cheaper car insurance might be the answer. Sign up with the
Jerry
app to compare quotes from dozens of car insurers. In just minutes, you could save hundreds of dollars a year on your car insurance premiums.View full answer
- Gregory R.
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