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How Fast Will a Car Loan Raise My Credit Score?

Last updated 03/15/2024 by

Lacey Stark

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While a car loan will improve the score listed on your credit report — assuming you maintain a spotless payment history — the effect will not be immediate. There are many factors that contribute to your credit score, and it’s important to know exactly how your credit accounts, such as car loans, have an impact on your score.
Getting a new car is exciting, but getting a new car loan can be daunting. You’re now deeper in debt, plus you have a new monthly payment to manage on top of your other bills. But, if you’ve been careful not to bite off more than you can chew, this new car loan can help to improve your credit history.
This is particularly true if you’ve experienced some bad credit history or have had very little activity on your credit reports. Today we will answer the question: How fast will a car loan raise my credit score? In addition, we’ll look at how your credit score is determined and other ways to improve your score aside from car loans.

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How credit bureaus come up with your credit score

There are a number of factors that credit bureaus use to calculate your credit score, and each item carries its own weight. Plus, depending on the credit scoring model used to calculate your score, those weights can vary.
For example, your FICO credit score considers your payment history to make up 35% of your credit score, whereas VantageScore 3.0 weighs your payment history a bit higher at 40% of your total score. Whether it’s FICO or another model used to calculate your scores, they all pull the information from your credit reports by the three major credit bureaus — TransUnion, Experian, and Equifax.
FICOVantageScore 3.0
Category% of scoreCategory% of score
Payment history35%Payment history40%
Total balance owed30%Age & type of credit21%
Length of credit history15%Credit utilization20%
New credit10%Total balance owed11%
Credit mix/type of credit10%Credit inquiries5%
Avaliable credit3%
In general, the components that make up your credit score are roughly the same. These include your payment history, age and type of credit, your credit utilization ratio (the percentage of available credit you’re using), the total amount you owe, your available credit, credit mix, and recent credit behavior, which might include any hard inquiries into your credit history.
Additionally, your credit score can be affected by not having enough, or any, credit accounts. Lenders and other creditors want to verify from your credit report that you’ve handled loans responsibly in the past. This helps them decide if you a good risk to borrow money.

Pro Tip

Keep in mind that credit scores can vary quite a bit from one credit bureau to another. For instance, some creditors only report to one or two agencies, some report to all of them, and occasionally they report to none at all — which can be a shame if the data is positive. In the case of unreported credit information, you can request that a creditor report your timely payments or other positive info, although they are not required to comply.

Will a car loan raise your credit score?

Unfortunately getting a car loan isn’t a quick fix to improve your credit score, but it can happen if you manage your loan well. First of all, your score will take a hit just by getting the loan itself.
That’s nothing to worry about — your score will naturally fluctuate throughout the course of your life as you apply for and experience different types of credit situations. But it does mean you can’t expect a boost in your score by simply buying a car and getting a car loan.

How auto loans help your credit report

There are basically two main ways that getting a car loan will cause an increase in your credit scores.
  • On-time payments. On-time loan payments are the most heavily weighted part of your credit. Because of this, timely payments have the greatest effect on either a positive or negative credit history. Continue to make your monthly car payments on time and you should expect to see your credit score rise a bit after six to 12 months. Of course, that also depends on whether you’ve properly managed any other credit accounts you have during this time.
  • Improves credit mix. When auto lenders or other creditors take a look at your credit report before deciding whether to extend you a line of credit or give you a loan, they like to see you’ve successfully handled a variety of credit types. Specifically, they like to see a solid credit mix that includes both revolving credit (like credit cards and retail accounts) and installment loans, such as personal loans, mortgage loans, and auto loans. Therefore, if your credit profile is a little thin (you don’t have much debt or only revolving debt) getting new credit, such as an installment loan for a car, can improve your credit mix and thus increase your overall credit score.

How can a car loan affect your credit score negatively

As previously mentioned, you’ll see a drop in your credit score simply from getting an auto loan. But assuming you manage the loan well and continue to make on-time payments, expect your credit score to bounce back. The following are the negative effects you can expect to see as a result of car loans.
  • Hard credit inquiry. Every time you apply for credit lines or loans, the lender will perform a credit check that results in a hard inquiry. This will drop your credit score a few points but will come off your credit report within two years and will likely be disregarded by creditors after a year.
  • Lowering the age of your credit. One of the factors included in calculating your credit score is the average age of your credit mix. Lenders like to see a long history of good credit behavior.
  • Adding a new credit account. The effect of adding new debt to your credit report is twofold. It adds new credit to your profile and it increases your total amount owed, both of which can have a temporary negative impact on your credit history. Having said that, adding a new account can also improve your credit mix, which is good for your score.

Other ways to improve your credit score

Building credit can be tough, and trying to remove negative credit history from your credit can be even harder. However, there are a ton of ways to go about improving your credit profile and increasing your credit score.

Credit builder accounts

If you have no credit or poor credit, you might want to consider some credit-building strategies to raise that low credit score. One option to try is getting a credit builder loan, where you pay off the loan in fixed monthly payments before you actually get the money.
Another idea is to get a secured credit card, where your timely payments will help build your way toward a good credit score. When you apply for a secured credit card, you pay a security deposit first. This payment is then used to make credit card payments should you forget or refuse to make them.

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Credit card balances

In a perfect world, you could pay off your credit card balance in full every month and never pay any interest. In reality though, sometimes you need to carry a credit card balance for at least a little while. However, as long as you continue to make your monthly payments on time for credit cards and installment loans, your credit report will thank you.
Plus, as you pay down your car loans or credit card balances, you will have the added benefit of improving your credit utilization rate, which creditors typically prefer to see at 30% or less. Plainly speaking, this means you should aim to not use more than 30% of your available credit at any time.

Get a co-signer

If you find that your credit score and income are not good enough for a lender to approve your car loan, you may need to ask a friend or family member to co-sign the loan for you.
This can actually be a great way to not only get a more favorable interest rate, but to increase your score as well. You’re essentially piggybacking off someone else’s good credit, raising your own in the process.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Pro Tip

If you can, try to pay off your car loan early. This will not only get you out of debt faster but will also save you a ton of money on interest. If this is an option for you, be sure to check with your lender to make sure there’s no penalty for early repayment.


Will paying down my car loan increase my credit score?

As you pay down your car loan, you will gradually increase your credit score. In fact, making on time payments and reducing the amounts owed on your revolving credit, installment loans, and other debts will all have a positive impact on your credit profile. All of these elements come together to show auto lenders and others that you’re responsible with your debts and a good risk for future loan approval.

How long does it take for a new auto loan to show on my credit?

As soon as you’re approved for a car loan, accept the terms, and sign on the dotted line, you should expect that installment debt to show up on your credit report within 30 days. Most lenders report to credit bureaus every month, so it might only be a matter of days before your auto loan appears on your credit report.

How long does it take for my credit to recover after buying a car?

It may take a year or more for your credit to get back to normal after getting a car loan, but it will get there as long as you manage your debts responsibly. The timeline also depends on the progress you make on your other debts during this time period.
Plus, if you really work on your credit score in the meantime, you could consider refinancing your auto loan down the road and qualify for an even lower interest rate. The better your credit score, the better interest rate you can qualify for, saving you hundreds if not thousands of dollars over the life of the loan.

What credit score is needed to get a car loan?

There isn’t an exact magic credit score number you need to be approved for an auto loan, but you might want to shoot for at least 600 if you are planning ahead. In the case of very bad credit or no credit, you still might be able to get a car loan, but you can also expect to get a much higher interest rate and less favorable loan terms than someone with good or excellent credit.

Key Takeaways

  • Acquiring a car loan will help raise your credit score and improve your overall credit report, but it won’t happen overnight.
  • A car loan can improve your credit score by adding to your credit mix and showing a solid payment history.
  • Expect to see an immediate dip in your credit score after getting an auto loan. That being said, it will bounce back as you continue to make your car payments on time and pay off the debt.
  • A car loan may negatively affect your credit report because you’re adding a new credit account, undergoing a hard credit inquiry, and lowering the average age of your credit accounts.
  • There are a lot of ways to improve your credit score, making it easier to get installment loans and other revolving credit in the future.

Get the best deal on a car loan

Before you sign on the dotted line for a car loan, be sure to compare multiple offers to get the best possible deal. Make sure to consider how much of a down payment you plan to offer, the interest rate you can qualify for, and what your target amount is for affordable monthly payments.
Having a manageable monthly payment can go a long way toward easing your stress over having a new debt to pay off. Not only do you want an affordable payment, but you also don’t want your loan terms to last long. Consider reviewing the tips and tricks in this article and comparing potential car loans before applying for a new loan.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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