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
Overall Credit Report
3 Tips for Refinancing a Car Loan
Refinancing your auto loan could lead to lower monthly car payments and more money in your budget. Lantern by SoFi can help you find the right auto refi loan for you. Shortening the term of your auto loan may increase your monthly payments, but you’ll likely pay less in interest over the life of the loan. You may have trouble refinancing the loan on a car that is worth less than what you owe. For more info, check out When Is the Right Time to Refinance a Car?
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