Credit Score Dropped After Buying Car
- Low credit score hurting your financial life?
- We may be able to help you improve your score, fast!
- Call us today for your FREE case review!
Noticing a drop in your credit score after purchasing a car may come as a surprise to most first time buyers. Vehicle purchases can impact a credit score positively, or negatively depending on the consumers ability to meet their loan obligations.
Any drop in a credit score requires consumers to review their credit reports to identify the reasons for the impact occurring. However, a minor drop is normally expected due to the process used to approve vehicle purchases. Read on to discover what these are.
How Buying A Car Can Impact Your Credit Score? Short Term
When an individual applies for a new line of credit, like a car loan, lenders will make a hard inquiry into their credit reports when reviewing the application. If a consumer has too many hard inquiries reported in a short time frame, their credit report will be negatively impacted. Generally, 6 or more hard inquiries is considered excessive.
Consumers credit scores may also temporarily be impacted by the new line of credit being opened, increasing their debt obligations and debt to income ratio.
How Buying A Car Can Impact Your Credit Score? Long Term
Ultimately purchasing a car will either positively or negatively impact consumer credit scores subject to how well they meet their loan obligations.
How Purchasing A Car Can Help Your Credit?
- Make all obligated payments on time: Consistently making the required loan repayments will reflect positively on consumer credit scores as their payment history influences 35% of credit score ratings.
- Improves consumers credit mix: Successfully meeting the repayment obligations of various loan types will help prove a consumer's “credit worthiness”, subsequently boosting their credit score.
How Purchasing A Car Could Hurt Your Credit?
- Consumers miss one or more payments: A single missed car loan repayment will drastically impact consumer credit scores. Missing a payment by a full billing cycle (30-45 days) will result in the consumer being declared delinquent on their loan obligations, resulting in drastic credit score decreases.
- Consumer defaults on the loan: Lenders may declare your loan in default if payments have remained outstanding for 30 days or more. Once an account has a default status reported, consumer loans may be sold to debt collectors to seek payment.
- Consumer can’t afford the loan: Consumers who can't meet the required loan repayments because they are overextended with credit will eventually have late payments reported on their accounts.
Bottom Line
Credit scores negatively impacted after purchasing a vehicle are often a result of too many hard inquiries within a short time frame, or due to a new line of credit being added to a consumer's overall obligations.
The first step is to review credit reports to identify the exact cause of the drop before any solutions can be considered. The second step is to consult credit repair specialists Credit Sage to ensure you attain the best credit score possible.
Take Your Financial Future Back Into Your Own Hands
Speak with a live credit specialist for your free consultation, now