Car Loans: How Do They Affect Your Credit Score?

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Understanding Credit Scores
Payment history (35%) Lenders want to know whether you've paid past credit accounts on time. This helps them determine how much risk they'll be taking on if they extend you credit. This is the most important factor in a FICO Score. Amounts owed (30%) Having credit accounts and owing money on them does not necessarily give you a low score. However, if you are using a lot of your available credit, this may indicate that you are overextended, and at a higher risk of defaulting. Length of credit history (15%) Having a longer credit history generally has a positive effect on scores. However, even if you haven’t been using credit for very long, you may still be able to have a high FICO Score, depending on the rest of your credit report. New credit (10%) Research shows that people who open several credit accounts in a short amount of time represent a greater risk, especially if they don't have a long credit history. Credit mix (10%) Having different types of credit, such as credit cards, retail accounts, and installment loans, can positively impact your credit. However, it's not necessary to have one of each.
What Are Car Loans?
Do Car Loans Affect Your Credit Score?
Different Ways Car Loans Can Affect Your Credit Score
Hard Pulls
Soft Pulls
Payment History
Credit Mix
Overall Credit Report
The Takeaway
Frequently Asked Questions
Photo credit: iStock/Antonio_Diaz
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About the Author
Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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